The Benefits of Dealer Installed “Hard-Adds”
From time to time you hit the jackpot and the perfect customer walks into your showroom with zero reservations around paying the full sticker price or MSRP on a vehicle. In that moment, as the dealer principle, general manager, finance manager or CFO of a car dealership you are thinking, “Finally, a customer who appreciates the value of what we do here and the quality of the products that we sell.” For as great as that moment feels, even in those optimal scenarios your gross margin is likely only going to hover somewhere around 10% before the sale moves to the finance department. Further complicating matters, online and mobile apps such as True Car, Kelly Blue Book and Edmunds may embolden your customer to come in ready to haggle, or they may present you with the website of a rival dealership to trim the price tag even more. Today’s car buyers are no nonsense. They are well informed and ready to negotiate, often having more tips and tools up their sleeves than we have products or vehicles to sell them. So it is no small task to generate a profit while also maneuvering the gauntlet of customer satisfaction – avoiding the permanent branding of poor online reviews across all social media platforms.
A New Approach to Selling Vehicles
It’s important to stay one step ahead of this savvy new legion of car buyers to keep the playing field level and to prevent having to over negotiate to the point of a loss. Herein lies your problem – how do you deliver additional products that both provide customer value and maximize your dealership gross beyond manufacturer rebates, warranty packages, maintenance programs and security features? The answer – dealer installed non-cancellable items, otherwise known as “hard-adds.” Hard-adds come in the form of leather interior conditioning treatments or fabric guards, and they are features made available to costumers at the time of sale or with easy to manage due bills that are non-returnable, with no chargebacks or cancelations.
The Struggles With Chargeback Items
Nobody likes the inconveniences of unwinding a deal 6 months after the unit left the showroom floor, and chargebacks are often at the root of such complications. Chargeback items include warranties and extended warranties, ongoing service agreements, and easily removed bells and whistles such as security and navigation features that can be cancelled at any given moment by a customer. A chargeback situation requires the dealership to compensate or reimburse the customer for their investment. Simply put, they’re a huge hassle, requiring additional paperwork, credit card processing and associated fees, and the need to update and create new leases. They can negatively impact your business’ ability to accurately project monthly or quarterly profit margins, and chances are, your compensation plan does not account for chargebacks greater than 90 days. Your top sales reps know that the dealership across the street doesn’t penalize their team for chargeback situations, so as a result, you grin and bear it. You add it each month and quarter to the chargeback line item and just cross your fingers that in the end, the good will outweigh the bad. This complication is not your sales rep’s “fault,” per se, since dealer-installed options are a regular occurrence, but if you are going to offer ad-ons, you might as well make them hard-adds – saving your dealership a whole lot of hassle right from the beginning.
Petra Sheild’s Line of Hard-Add, Non-Cancellable Items
At SCL, we want to support your dealership in warding off the headache of chargebacks by offering a full spectrum of hard-add options. Petra Shield ProKits are a line of high-quality, non-cancellable hard-add items that can be applied to a new or used vehicle at the time of purchase. These one-time options cannot be removed or charged back. The full line of Petra Shield products includes:
- Petra’s Paint Protector – A special blend of polymers that bond to a car’s paint finish, sealing and protecting surfaces from fading, oxidation, acid rain and harmful elements.
- Petra’s Leather Conditioner – Restores the original texture and appearance of a vehicle’s leather while offering long-lasting protection against stains and various types of damage.
- Petra’s PetraFlate Nitrogen and Nitrogen Caps – Extend the life of your tires and notably improve your fuel economy. Tires inflated with PetraFlate nitrogen can last up to 50% longer than those inflated with regular air because nitrogen as an inert gas is more stable in its chemical composition in relation to temperature fluctuations and pressurization.
- Petra’s Fab Protect – Provides superior stain protection for your vehicle’s upholstery and fabric through water, oil and stain repellency. Fab Protect makes surfaces easier to clean and maintain, keeping your car interior looking new.
- Petra’s H2O-X™ – Increases the water repellency of a windshield by forming a chemical bond with the windshield glass to increase water repellency, causing water to bond and easily shed off glass for superior visibility. Increases visibility and allows for safer driving in rainy and snowy conditions. It also prevents hard-water marks and stains on glass.
The Economic Benefit to Carrying Hard-Adds
By incorporating hard-add products such as leather conditioning treatments and paint protection, you effectively reduce the number of monthly chargebacks for your dealership. With the uncertainty of the 2019 economy, and whether or not the Feds will continue to raise interest rates, now is the perfect time to review your dealer installed option portfolio. Consider transitioning to more hard-add product offerings versus carrying a spectrum of easily charged back items. Explore whether or not your business is aligning your financing packages and offerings so that they may offset potential economic downturns. With the cyclical nature of the stock market, housing market and consumer climate, it has yet to be determined what 2019 holds for the strength of our economy. Staying ahead of the curve by being strategic about your product portfolio will give you a competitive vantage point to weather economic fluctuations.
The Bottom Line
When the economy slumps as federal interest rates increase, consumers look to their spending habits to see where they can cut extraneous expenses. Over the past few years interest rates have gone from 0% to 4 – 6.5%. As a result, consumers are asking, “Where can I trim expenses? What can I get rid of?” By understanding the psychology of your buyers, who are reeling from the realization that they can no longer afford to maintain pricey warranties and unnecessary lease features, you can eliminate the possibility of excessive returns. Chargebacks unravel all of the upfront work that you as a dealership did at the time of lease signing. With this in mind, it would be wise to move more toward non-returnable, non-cancellable, hard-add product and services to decrease chargebacks and increase your overall gross profit. While understanding the differentiation between a customer’s needs and wants is important, as a dealership, set yourself up to win by providing them with products they can opt into without the back door option of cancelling and returning. In short, don’t focus as much on finance packages and instead push the sale of more hard-adds.
Contact an SCL Consultant Today
In a wide range of industrial sectors, SCL is committed to being the number one logistics and solutions provider for the products that protect and optimize the machines that keep our country moving. We pride ourselves on remaining at the forefront of industry trends and technological innovations, and as the market continues to evolve, we are committed to providing extensive product and industry knowledge and total performance satisfaction for our customers. For information on how we can assist your fleet in choosing the optimal products at a competitive price, contact an SCL consultant today.