Maximize Lease Terminations
In 2016, leases accounted for 30.2 percent of all new-vehicle transactions, up from 24 percent in 2013, according to Power Information Network from J.D. Power. With those numbers growing, learning how to satisfy lease customers has become increasingly important, fixed operations consultant and trainer Chris Collins says, particularly once those leases end. And that business-building opportunity specifically begins in the service department.
According to NADA data, customers are 17 times more likely to buy their next cars from the same dealership if they service the vehicle with that dealership.
“That’s all about lease penetration,” Collins says. “The great thing about leases is that you have the chance to get them in another car. You know when their lease terminates, they have to bring it back to you most of the time.”
However, according to the J.D. Power 2016 U.S. Lease End Satisfaction Study, dealers are reconnecting with lease customers less than half the time before their lease ends, despite the fact that the study showed if a connection is established prior, the customer is much more likely to remain with the dealership.
“If we in service haven’t made a connection with them and we’re not their car guy in the industry, we’re going to lose them to another brand because there’s no connection emotionally whatsoever,” says Collins, who does independent coaching as well as speaking through his organization, Chris Collins Inc.
Collins spoke with Fixed Ops Business to break down the biggest keys to maximizing lease terminations and creating a loyal customer who will almost surely return to the dealership—over and over again.
1) Have a dedicated team to process lease customers.
Collins recommends assigning an internal advisor and dedicated technicians to handle lease customers so that customer-pay jobs aren’t fighting with the influx of lease vehicles coming in from trade. In addition, it’s a good training ground for new technicians coming up, Collins says. And because lease work is generally lower-skilled repairs, you can also lower your cost of labor, he says, as you don't have to pay a master technician to do the work.
If you can’t have an entire team dedicated to lease customers, Collins recommends dispatching the work to your lowest-paid technicians and still assigning one qualified advisor to be the go-to person for this type of work.
“If you spread it between all the advisors, your used car manager is chasing a bunch of different people. You want a go-to person with one log,” he says.
2) Create a team atmosphere—throughout the dealership.
A renewed focus and dedication to lease terminations will also help bolster the relationship with other departments, such as sales and used cars.
“You’re on the same team. I think too many times we think of it as different businesses but it’s not,” Collins says. “To the customer, we’re all the same business. The financial statement all adds up to the same business. We’re all in the customer business.”
3) Make sure you build a connection with customers.
Ultimately, lease terminations come down to building emotional connections with the customer, Collins says. You need to ask yourself if the service department has made friends with every customer who walks through the door.
“You have to think beyond the commodity of the car. How well is our service department making it easier for customers to come in?” he says. “Are we stopping with each one and taking time and making friends?”
4) Don’t overload service advisors.
One of the main problems in creating that emotional connection, Collins says, is that manufacturers push for quick lubes, which has left many service departments with their least-talented advisors writing up 25 customers per day. The result is very little connection with those customers.
“We’re just running them through like herds of cattle and we wonder why there’s no customer loyalty,” Collins says.
Part of resolving this problem has to do with getting service advisors the proper training, he says, but the other part is making sure service advisors aren’t working with too many customers in one day. In fact, he recommends service advisors only write up 12 customers per day, and if they’re new or struggling, reduce that number to eight customers per day.
“You want to connect with every customer. The outcome of how many repurchase from us coming off a lease is tied to that,” Collins says. “Your lease convergence to another sale is directly affected by that.”
5) Track turnaround time.
Once a leased vehicle is turned in, that vehicle is depreciating every day, Collins says. That’s something that service managers need to pay attention to and understand how flooring and the expense of the inventory affects profitability. First, he says to explain this to everyone in the service department and then be diligent about tracking turnaround time within your network (even if it’s in a simple Excel document), which should be no worse than 2–3 days. Lease returns may come in peaks and valleys, but even still, getting those vehicles back on the front lines as quickly as possible should be of utmost importance.
“You don’t want them to sit and wait for four or five days. At that point, they’re used cars. Every day they sit, they depreciate,” Collins says. “If you don’t have a dedicated source to turn them around very quick, they’re fighting with the customer cars and you have to make a choice between a customer and internal cars. A lot of times, that’s why the turnaround is 5–7 days.”