As 2024 progresses, a number of factors are combining to constrain some of the traditional avenues open to dealers to maximise the profit potential of new and used car sales activity. For example, the Financial Conduct Authority (FCA) has already banned discretionary commission arrangements (DCAs) attached to motor finance agreements, and separately in February, it called on dealers to stop selling GAP insurance products due to concerns about offering ‘fair value’ to consumers.
DCAs, which were in operation between 2007 to early 2021, enabled ‘brokers’ (including dealers) to earn additional commission by adjusting the overall interest rate on a new finance agreement. The FCA probe could lead to compensation payouts for customers who were not made aware of the DCA within their contract, and the implications for the motor retail sector are yet to be determined.
Wider consumer pressures remain a factor impacting dealer profitability, too. Inflation remains stubbornly above the Bank of England’s target of 2%, and the ongoing cost-of-living crisis means many household incomes remain stretched.
This all means dealers find they need to work harder to optimise revenues and profitability – both in sales and aftersales. While many tend to focus on the retail side of their businesses, aftersales departments can be crucial in supporting the quest for additional income.
Using Self-Service To Boost Revenues
Tjekvik’s digital self-service solutions enable dealers to benefit from additional revenue opportunities by presenting their chosen value-added products and services to customers during the check-in and check-out process. With many customers being more comfortable in choosing such items at their own pace, this feature helps to take pressure off service advisers to upsell and helps managers drive additional revenue opportunities consistently and measurably.
Last year, over 154,000 customers in the UK opted to purchase additional products and services during the Tjekvik digital check-in process, with an incremental value of more than £5.8million. This kind of solution is also helping dealers retain customers, with over 103,000 enquiring about service plans for their vehicles via the digital interface. Vehicle sales departments benefitted too, with over 95,000 UK customers using digital self-service to request valuations on their vehicles, providing a valuable additional pipeline of leads.
The most popular products sold in 2023 were air conditioning services, top-up fluids, key fob batteries and protective equipment with UK dealers making an average of £10,000. 2024 is even better for Tjekvik dealerships in the UK with over 64,000 added-value items sold generating £2.3 million in revenue YTD. While earning much-needed additional revenue may be more difficult in today’s climate, the opportunity is still there for those who explore ways to enhance established processes.