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The Rental Effect

June 2010, F&I and Showroom - Feature

by Jim Schalberg

People who work in rental car departments at dealerships often have a complex. They like to think of themselves as real car people, but no one ever takes them seriously. The funny thing about that is a rental car department can add so much to the dealership — not just the usual fluff of customer satisfaction, convenience for the dealership or that sort of thing. A properly run rental car department can help sell more cars, increase repair order sales and add revenue to the service department.

Opportunity No. 1: Sell More Cars

Is it true that a rental car department rents used cars? Once a vehicle gets a plate, it’s considered used, right? But that doesn’t mean the vehicles filling the rental line are high-mileage vehicles. In fact, most rental car lots are filled with new cars that were placed into service, or, at most, one- or two-year-old vehicles. So, imagine what it could mean for your dealership if your new-car manager, used-car manager and rental manager were all tuned in to the same big picture.

What’s the big picture, you ask? Well, consider this scenario: The new-car manager has a customer who wants to trade a current model-year vehicle or one-year-old vehicle to the next size up. Unfortunately, you can’t put enough money into the trade to make the deal. Most dealers would have to let the guy walk, right? Well, not if your managers are working together.

With a combined effort, they might figure out that they can put the extra money into the trade, make the deal and run the car in the rental department until it earns enough money to be attractive to the used-car department. Not a bad plan, right? Not only have you made another deal, the rental car department gets another vehicle for its fleet and the used-car manager gets a current model-year vehicle for the front line.

The best part is, the opportunities don’t end there. With the deal your managers just worked out, your dealership now has a “switch piece” it can sell to that customer who simply can’t get into that new car but is just fine purchasing a current model-year vehicle with a few miles on it. You take a trade on that car and the wash ticket is starting to build.

It all worked out simply because you had a rental department to lean on. Repeat the process twice more each month and you will sell 48 more new and used cars than you would have without the rental department. Now ask your controller to remind you how many advertising dollars you need to spend to sell 48 more cars. Not a bad return, right?

Opportunity No. 2: Increase Repair Order Sales

There are two kinds of service writers. First, there is the type who simply writes down the customer’s service request, then there is the type who sells. Selling is helping someone make a decision or solve a problem. With a rental department on site, your service writers can solve their customer’s biggest problem: getting home or to work while his or her vehicle is being worked on.

Imagine that: No longer does the customer have to decide which is most important: getting his or her vehicle fixed or getting to work. Can you imagine how many service sales can be saved with a rental department?

Now, let’s consider another scenario: Your diagnostic charge includes a one-day rental and the rental unit is ready to go. Problem solved, right?

Remember that incremental sales thing I talked about earlier? Well, if your service writer is able to write one extra repair order a day and your shop works a five-day week, that means 100 additional repairs can be generated. I know that’s well worth the additional service orders you’ll have to print out and the extra deposit slips you’ll need to take on your next visit to the bank.

Now, there are companies out there that can help run your rental department. But my question is, why would you want to go in that direction? The biggest problem I see is you can’t control what vehicle brands the agency uses. For instance, if you sell Fords, do you really want that agency sending your customers down the road in a Toyota? I hope not. Not to mention the fact that your customer is now angry because he or she waited an hour for a car when you have a lot full of them.

Keep an eye out for more of my tips and ideas on how rental cars can improve your dealership’s bottom line in future issues of F&I.

Jim Schalberg is a 39-year veteran of the automobile industry and has spent 16 years in new-car dealerships. He also spent 16 years in the rental industry as an owner/operator, and now serves as the owner of Jim Schalberg Auto Rental Training. E-mail him at jim.schalberg@bobit.com.

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