Automotive News F&I Special Sections of 2008 - (Page OCT48) 48 • OCTOBER 13, 2008 finance & insurance Toyota Financial tests loyalty-discount plan Alysha Webb awebb@crain.com Toyota Financial Services is offering some owners of Toyota cars and trucks as much as $1,000 to return to their dealerships for new models. To be eligible, the owners must finance their vehicles through Toyota Financial, the captive of Toyota Motor Sales U.S.A. Inc. The program targets owners who are not “upside down” — that is, they don’t owe more than their vehicles are worth. Toyota Financial is testing the loyalty program at 100 U.S. dealerships that are especially good at pursuing sales leads, says Mike Wells, a group vice president of the captive. The test runs through year end. If it succeeds, Toyota plans to introduce it nationwide. “From a finance standpoint, we’ve already got the account,” Wells told Automotive News. “The motivation is purely to generate another retail opportunity at the original dealer.” Toyota Financial’s Mike Wells: “Everybody is trying to look for business in spots they’ve never looked before.” Wells says Toyota Financial developed software to identify owners whose vehicles are worth more than their loan balances and who may be looking for a new car or truck. He declined to discuss details. leads in the program’s first two months, says Tom Rudnai, dealership president. The suburban Los Angeles dealership is among the nation’s largest Toyota retailers. Looking for loyalty To qualify for Toyota Financial Services’ new program of customer loyalty incentives, owners of Toyota vehicles Must finance their cars and trucks through Toyota Financial Must buy or lease a new vehicle from the same dealership where they got their current one Should not owe more on their current vehicle than it is worth Source: Toyota Financial Services ‘Opened the door’ Rudnai concedes that most of the customers didn’t immediately commit to trading in their current vehicles or buying new ones. But participation by Toyota Financial Services “opened the door for us on a lot of customers we might not have been able to call,” he says. “Especially in times like this, it’s a lot less expensive to keep a customer than to try to find one,” Rudnai says. For Rosner Toyota, of Fredericksburg, Va., the program has produced 18 leads and six sales. That 33 percent closing rate is higher than the dealership’s typical rate of about 25 percent, says James Carey, Rosner’s customer loyalty program coordinator. And most of those cus- Price of loyalty The captive contacts customers, offering them “loyalty” certificates of $500 to $1,000 toward a new-vehicle purchase or lease, depending on the vehicles they own. If a customer expresses interest, Toyota Financial forwards the sales lead to the original dealership. Longo Toyota-Scion-Lexus got 270 tomers bought an additional vehicle rather than trading in a car or truck, he says. Not a gimmick Having Toyota Financial make the first contact with owners gives the promotion greater legitimacy, Carey says. “It’s not a gimmicky dealership program,” he says. And it “keeps the dealership in the forefront of the customer’s mind.” Jay Francis, general manager of Right Toyota in suburban Phoenix, says the program has “been a home run for us.” Francis says he’s getting 25 leads a month from the program. As many as 70 percent of those leads result in new-vehicle sales or leases, he says. “They want our product, and they want Toyota Financial Services,” Francis says. The new program “gets them out of their cars a little sooner. In these times, it gives you another option.” As the program aims to build loyalty to Toyota dealerships, Wells says, it also enables Toyota Financial Services to learn more about customers’ needs. Says Wells: “Everybody is trying to look for business in spots they’ve never looked before.” c Looking good is F&I opportunity Alysha Webb awebb@crain.com Cover story Among the repair items typically covered by an appearance protection plan Small dents and dings Paint defects caused by acid rain or bird droppings Upholstery tears, stains Minor tire, wheel and rim damage from road hazards than 300 U.S. dealerships sell the coverage, including most stores owned by AutoNation Inc. That’s what AUL delivers. Service contracts from AUL provide peace of mind for both you and your customers. That’s because AUL is the industry leader with an unmatched commitment to service, reliability and financial strength. To learn about the rest of our advantages, call AUL today. 800.826.3207 www.aulcorp.com Service Contracts. It’s What We Do.® © 2008 Associates Underwriting Limited L.L.C. As owners hold onto their cars and trucks longer, many want to keep those vehicles looking good. That desire gives auto dealership finance and insurance departments and their suppliers an opportunity to profit from selling appearance protection plans. The plans cover repair costs for such things as small dents and dings, faded paint, upholstery rips and stains, and minor tire and rim damage. Retail costs of the plans often include a substantial markup for dealers. “We haven’t had a better year,” says Lindsey Bird, vice president of finance and insurance at Dent Wizard International, a division of Manheim. Dent Wizard’s Assurance Vehicle Appearance Protection coverage comes in three-, four- and five-year plans that sell at retail for $900 to $1,500. Dealers pay $300 to $500 for the product, Bird says. This year, Bird says, Dent Wizard expects to sell more than 21,000 appearance protection plans. More Moving down Until recently, vendors say, buyers of appearance protection plans tended to own luxury cars. Now, they say, owners of vehicles that cost as little as $30,000 form a growing market for the plans. “We’ve definitely seen more of our product in midrange cars,” Bird says. CertifiedPLUS Inc., of Austin, Texas, also is having a good year, said Corey Castner, the company’s na- tional sales manager. In the third quarter of this year, CertifiedPLUS’ sales of appearance protection plans were up 8 percent from the year-ago quarter, he said. Castner declined to disclose the product’s sales volume. Castner said 688 franchised dealerships offer CertifiedPLUS coverage. The company offers three-, four- and five-year plans that cost $595 to $795 at retail. Castner would not say what dealers pay for the plans. “Our product is for everyday nicks and scratches,” Castner told Automotive News. “We cover between doing absolutely nothing to your car and taking it to the body shop.” Dent Wizard and CertifiedPLUS offer their appearance protection plans as point-of-sale items on dealership F&I menus. Customers also can buy CertifiedPLUS plans through dealership service departments. Both companies’ plans cover new and used vehicles. Neither company imposes a mileage limit. ‘Thrilled’ to sell Soave Automotive Group, of Kansas City, Mo., sells CertifiedPLUS coverage to about 40 percent of its new-vehicle buyers, says Ami Gully, the group’s finance director. Soave Automotive operates four dealerships. “I was thrilled when we got it, and so were the clients,” Gully says. “It increased the bottom line of the F&I department, and it was something the customers could use. I tell them it’s protecting your investment and increasing your trade-in value.” Nicole Schomer, aftermarket manager at Rosen Honda in suburban Chicago, estimates that 40 percent of her customers buy Assurance Vehicle Appearance Protection coverage. Dent Wizard’s Bird says F&I managers are promoting sales of appearance protection plans. Says Bird: “There’s pressure in the F&I department to contribute more to the profitability of the dealer.” c http://www.aulcorp.com http://www.aulcorp.com http://www.cso.com http://www.cso.com
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