The most recent study from AutoAlert demonstrates why it's important for car dealers to stay in touch with their customers.
Length of vehicle ownership increasing
According to the market intelligence firm IHS Automotive, the latest analysis of vehicle registration data shows that despite the increase in new car sales (and the corresponding assumption that these buyers are either trading in or replacing much older vehicles), the length of vehicle ownership remains on the increase.
As of September 2015, IHS estimates that the average vehicle ownership is now 67.9 months old – which breaks down to an average ownership length of 78 months for new vehicles and 63 months for used vehicles. It also represents an increase in the average length of ownership of more than 2 years for all vehicles since 2006.
If this trend continues to hold, even given the cyclical nature of the retail car business, in the future it will become increasingly difficult for car dealers to maintain a sustainable selling rate, let alone their current selling pace.
September 2015 AutoAlert study
"How long a consumer holds on to their vehicle has a direct impact on the SAAR and is a key performance indicator of the overall health of the auto industry," said AutoAlert CEO Brian Skutta. "To put this in context, the lengthening ownership lifecycle is resulting in consumers buying fewer vehicles over their lifetime giving dealers fewer opportunities to sell them cars if you wait for them to come to you."
With Survey Sampling International, AutoAlert conducted a survey of 400 vehicle owners (of which 35 percent were Millennials, 31 percent Gen Xers and 34 percent Baby Boomers) in September of 2015. The goal of the survey was to:
- Understand why consumers are holding on to their vehicles for longer periods
- Determine what motivates consumers to trade-in their vehicle
- Measure consumer awareness on their ability to trade-in to a new car before contract end
- Learn how consumers want to be notified when they are able to upgrade to a newer vehicle
- Evaluate what services would increase customer retention
- Analyze differences in responses between generations, gender, length of ownership and location
In other words, what can dealers do to retain customers by upgrading them to a newer vehicle before their current one is paid off five, six or even seven years down the road?
Key findings of the AutoAlert survey
Here are a few of the key findings AutoAlert uncovered:
• 75% of consumers would be very likely or somewhat likely to trade-in their vehicle today if their monthly payment would remain about the same
• 49% of survey respondents were not aware they were able to upgrade their current vehicle before their loan or lease is at end-of-term
• Regardless of how long consumers have owned their current vehicle, 63% of them would like to upgrade their vehicles every three years or less
• Dealerships that keep their service customers coming back are smart because 57% are very likely or somewhat likely to purchase a new car from the dealership where they service their car
• 69% of consumer respondents felt it was very important or somewhat important for the place they bought their vehicle to proactively notify them when they are in a position to upgrade their vehicle if it doesn't impact their monthly car payment
• More than half of consumers want to be notified about key points in their ownership lifecycle (e.g. warranty is expiring, trade-in value is about to decrease rapidly, before incurring mileage overages on lease, end of contract).
• The three highest motivating factors to buy or lease a new vehicle were:
1. Better fuel-efficiency 83%
2. Too many repairs to be made on current vehicle 68%
3. Additional safety features 65%
The Bottom Line – Stay in contact your customers
The AutoAlert survey proves that staying in contact with your customers is critical. But it also stresses that the information they receive from you needs to be of value to them – when their warranty expires, when they're in danger of over-mileage lease charges and, most importantly, when they can trade out of their current vehicle into a new one at or near their current payment.
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