Ageing used car stock and the increase in the cost of living mean that car retailers need to rethink their customer propositions in response, the RAC Dealer Network says.
Lee Coomber, RAC Sales Agent Director at Assurant, which partners with the RAC in the dealer and aftersales sectors, said that these trends meant that car retailers would need to identify ways of providing reassurance to customers who were being offered older vehicles at historically high prices while their personal finances were stretched.
He explained: “We are now in the third year of much lower-than-usual numbers of new cars being sold, meaning that the average age of the overall parc is increasing. This situation is unlikely to change soon, and it could even persist for several years. The used car stock profile for most dealers therefore continues to become older.
“At the same time, while the substantial month-on-month used car price increases that we have seen in the last couple of years are no longer occurring, neither are they really falling. This is happening against a backdrop where the increase in the cost of living is putting huge pressure on personal finances for a large number of people.
“The sum total of all these trends is that car buyers are, for the foreseeable future, going to be asked to pay historically high prices for older vehicles at a time when they have much less flexibility to pay for unexpected repairs. It’s a situation that alters the way in which consumers look at the overall used car proposition.”
Lee said that the RAC Dealer Network was in detailed discussions with many of its 1,200-plus members to examine ways in which their customer propositions could potentially be modified and enhanced in response to the changing market, providing advice on everything from the products offered, to training and sales analysis.
“Essentially, customers are looking for a high level of protection against the possibility of unexpected expenses, especially as they could be buying a car that is older with higher mileage. The main tool here is to offer a more comprehensive and longer warranty, either as standard or as part of an upgrade path.
“It’s important to realise that, at times such as these, customers are very often actively looking and are willing to pay for higher levels of protection. Warranties are, to a great extent, a countercyclical product that often sees strong levels of sales during times when economic conditions are difficult.
“However, there are other important elements in rethinking the proposition. Ensuring that each vehicle is prepared for sale to a high standard, as well as emphasising the comprehensive nature of each service history, for example, also has a part to play. It is about providing as high a degree of reassurance as possible.”
Lee added that there was also interest from consumers in other products that would help increase the affordability of vehicle ownership, such as through service plans.
“The common theme we are hearing from dealers is that motorists don’t want to be in a position where they are having to find large, lump sums and paying for servicing falls into this category. Service plans help customers to spread the cost of maintenance in a predictable manner over time.
“We’re in a position where we expect a large proportion of dealers to revise their proposition during the second half of the year as market conditions continue to change, and we’ll be working to support them through that transition.”
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About the RAC
The RAC, an iconic UK brand, provides complete peace of mind to 13 million UK private and business drivers, whatever their motoring needs. As well as its premium nationwide breakdown assistance service – with an expert branded patrol workforce attending more than two million breakdowns every year – it offers a wide range of market-leading products across insurance, legal services, vehicle inspections and service, maintenance and repair. The RAC is also at the forefront in helping drivers make the switch to electric vehicles and leads in the development of new solutions for businesses and OEMs, partnering with the best in the motoring and mobility space.
Assurant, Inc. (NYSE: AIZ) is a leading global business services company that supports, protects and connects major consumer purchases. A Fortune 500 company with a presence in 21 countries, Assurant supports the advancement of the connected world by partnering with the world’s leading brands to develop innovative solutions and to deliver an enhanced customer experience through mobile device solutions, extended service contracts, vehicle protection services, renters insurance, lender-placed insurance products and other specialty products.
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