With tens of millions of passenger vehicles recalled over the past year, there is a good chance that your customers own cars with at least one or two open recalls. An open recall means that the recall is incomplete either because the customer has not responded to the notice or the manufacturer has yet to provide guidance for when the work can be accomplished.
Open recalls present an opportunity for dealers to turn owners of recalled cars into buyers of new or certified pre-owned (CPO) vehicles. Specifically, you can leverage consumer concern about a recall by selling them a different vehicle and accepting that open recall vehicle as a trade in.
Dealers and Manufacturer Buyback
This past July, Fiat Chrysler (FCA) was ordered by the federal government to recall and buy back approximately 200,000 affected vehicles. It is the first time such an order was made and the details of that program have not yet been finalized.
Although the buyback will be a costly one for FCA, it may prove to be a boon as well. Indeed, when the affected customers receive their buyback notices, they will be instructed on how to turn in their Ram or Dodge vehicles. Likely, most customers will be shopping for another vehicle to replace the one turned in, giving dealers a strong opportunity to combine those checks with their own incentives.
Likely, not just FCA dealers will be taking advantage of the buyback program either. Competing brand dealers can join in by wooing shoppers desiring to switch brands. Certainly, you will need to develop your own incentive program — perhaps with manufacturer backing — in a bid to win conquest sales.
Dealer Incentive Program
Your dealership already has an incentive program in place as you work with and independently of the manufacturer to increase your sales. To win owners of open recall vehicles, you need to think outside of the box. The following are some points to keep in mind for your dealer incentive program.
1. Train your repair shop team. If customers are coming in or calling your repair shop and are expressing frustration over an incomplete open recall, a sales opportunity may be possible. Specifically, by training your shop team to ask them if they would be interested in trading in their vehicle for another one, that effort could very well lead to a sale. If the customer expresses interest in making a trade, then the repair shop should refer the customer to the sales team.
2. Reach out to your customers directly. You already know which customers have vehicles with outstanding recalls. This is where you can task your marketing team to reach out to them through a direct mail or email campaign. The campaign might address their recall concerns and explain to them that you will buy back their vehicle or give them a competitive trade toward a new or CPO vehicle. If your advertising budget is especially large, then consider running a television or radio ad to reach out to owners of all open recall vehicles in your media market.
3. Address their concerns. An open recall can be a big concern for some, especially if a safety issue remains unaddressed. For instance, a parent with small children may not want to keep their crossover utility vehicle as long as the recall remains open. Here, you could explain that you will accept the vehicle as a trade in and will also cover the necessary repairs.
4. Offer something extra. Customers with an open recall may not have a new car on their minds, but that can change if you sweeten the deal and put a time limit on it. For instance, with gas prices trending downward, you might offer customers free gas for six months, but only if they make their purchase by the end of the month. Add in all available incentives, including the conquest discount for owners of all competing brands. Leverage every angle possible to turn a dissatisfied or concerned owner into the happy owner of a new or CPO Vehicle.
5. Offer special financing. The one thing that may hold some customers back is financing. If the vehicle is leased, find out if the leasing company would consider pulling the lease forward as long as the customer agrees to lease or finance a different vehicle. Some customers may be afraid that they’ll be underwater with their new cars (owing more money on the vehicle than it is worth). Have your finance team work on favorable loan terms and leasing options to allay those concerns. Certainly, keep in mind that as recalls mount, your competitors are looking at ways to win new business too.
Open Recall Considerations
Dealers must be careful about buying open recall vehicles. Besides otherwise having an acceptable vehicle history report, you need to complete the recall before selling the car to a new party. This means working closely with the manufacturer to ensure that parts are available and the recall can be accomplished.
If you fail to complete a recall and offer the vehicle as a CPO, you might be held personally liable if a defect leads to an accident. Lastly, consider the cost of keeping a vehicle in your inventory as you await replacement parts. Keep this mind: a vehicle you are not allowed to sell represents unavailable capital.
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