Protecting auto retailers in the cost-of-living crisis with aftercare products
Recent headlines in the automotive press have highlighted the impact the cost-of-living crisis is having on the industry, not only on motorists but auto retailers also, with profit being hit by rising inflation and interest rates. The financial squeeze is causing consumers to tighten their fiscal belts, meaning businesses that simply raise their prices are walking a tight rope between maintaining pace with inflation and alienating customers.
Auto retailers need to find new routes to market and ways to boost the value of their offering – such as with vehicle warranty and asset protection products. One retailer has been reported to be doing just that: launching a “lifetime warranty” that covers used car buyers for breakdown, warranty, and annual services, providing additional benefit to customers and generating long-term subscription income.
How the cost-of-living crisis is hitting retailers
The Bank of England’s strategy of raising interest rates in response to rising inflation is hitting everyone hard – and intentionally so. The general idea is to curb spending to bring inflation back down through the dynamics of supply and demand. For the automotive industry, however, some auto retailers have been reporting strong revenues – suggesting consumers are still going out and buying vehicles – but profits are still being squeezed.
Firstly, higher interest rates lead to greater financing costs, meaning a tougher environment for business investment. Those interest rates also mean consumers are paying more for their vehicles when taking out a financing agreement, of course. Secondly, inflation leads to higher wage demands from staff, increased inventory, and other operational costs (energy, for example), as well as slower sales due to the reduced purchasing power of customers.
How can auto retailers protect their profit?
One great way for auto retailers to protect their businesses is by enhancing their offer to customers through the provision of high-quality financial aftercare products. Extended warranty, cosmetic insurance, and service plans are just some of the ways retailers can add value to their sales proposition – which provides benefits in multiple ways.
Your offer of financial support and protection to your customers during this cost-of-living crisis shows your ongoing commitment to keeping them on the road. They may have concerns about unexpected bills from faulty mechanical or electrical parts, for example, and an extended warranty may mitigate those concerns. In a previous blog we discussed how the cost-of-living crisis is causing many motorists to put off car maintenance. By protecting your customers, you are providing them with peace-of-mind, which can boost satisfaction rates.
Additionally, as the example retailer above pointed out, by offering customers vehicle aftercare you are creating new routes to market for your business and increasing revenue per sale. Working with a high-quality aftercare partner such as Car Care Plan will ensure your customers are getting access to the best products on the market, paired with first-rate support services.
To discuss partnering with Car Care Plan for your motoring financial aftercare provision, get in touch today.