In general, if a Canadian buys a home or a piece of property, that property is considered an asset and will appreciate in value over time. An automobile or truck, or any vehicle for that matter, is considered an asset in accounting terms on a...
In general, if a Canadian buys a home or a piece of property, that property is considered an asset and will appreciate in value over time. An automobile or truck, or any vehicle for that matter, is considered an asset in accounting terms on a balance sheet. However, that is one of the biggest misnomers in any sense of the word. A vehicle is the fastest depreciating item anyone can buy. Cars lose their value faster than pretty much anything in our economy; yet our society is a car culture. Not only do the majority of us need them to commute to work, we are attached to them. We couldn’t imagine living without them. The building of roads, the manufacture of cars and rubber tires, and the extraction of hydrocarbons to keep the cars running created much of the North American economy. That being said, most consumers just accept the car as fact of life and keep spending their hard earned money on buying and replacing them, and complaining to service providers that we are too expensive and that the services, repairs and maintenance we offer are just not “worth” it on their car. It does not add value to the vehicle so I am just going to drive this one into the ground and buy another one.
The point that most of the driving public and most service providers have missed is that spending money on vehicle repair and maintenance is about the cost of transportation, not maintaining the value of a vehicle. (Although you can definitely improve the resale value of a vehicle by maintaining it well, relatively speaking.) Years ago, a young lady brought her 1989 Dodge Shadow to my shop. After servicing it, inspecting it and diagnosing her concerns we came up with an estimate of approximately $500 dollars. When we first presented it to her she said her car was not worth it, that it was only a $500 car and if she did the repairs she would never be able to sell it for $1,000. We tried to explain that based on the type of driving she did and her annual mileage, she would be able to drive for another whole year with only the cost of an additional maintenance service in six months.
Her initial response after that explanation was that she had seen an advertisement for a vehicle financed at $189 a month and that was what she was going to do. We explained to her that after taxes her monthly payment was going to be $214 a month, which was the same as $2,568 a year for four years, after which there would be a buyout needed of close to $10,000. In addition to that we explained that after two years that particular model of car would be worth half of what she owed on it, and that she would still be committed to a minimum of $500 a year in maintenance to keep her warranty valid. She went ahead with the repairs and I am glad she took the time to dialogue with us about the cost of commuting to school and her job, and in the end we kept that Shadow on the road till she finished her degree and she now drives something more to her taste.
Beginning the Dialogue
For many shop owners, technicians and service advisors the automotive business is a place where you sell things: brake jobs, shocks and struts, timing belts etc. Our parts suppliers provide us with posters and other point-of-sale material to put up on our walls. Suppliers also provide incentives on particular items like a Loonie for every belt sleeve. Imagine an alien from another planet landing on earth and trying to sell you an Interplanetary Composite Material Deflector Shield. They are emphatic that you need one and that it will keep you safe. It is the best thing for space travel. In fact, you will die without one. Oh, and by the way, if you buy one today, you get one free! Best deal in the galaxy! But I don’t have a space ship to attach the shield to you say, how relevant is this shield to my needs?
My intention here is not to insult anyone, but to exaggerate what is going on between shops and their customers. When consumers buy, lease, or finance a vehicle, all they know besides the color, comfort, and certain conveniences is that they want this expensive piece of equipment to consistently start, run, and get them to where they want to go anytime they want. When it does not start, or breaks down on the way to work, costs money all the time, is always wearing out and is not worth anything after four years they are upset and frustrated. They make it our fault that it costs them money because we claim to be the experts, but they seem to always have car payments as well as service and repairs, and breakdowns. When they walk into a shop and see all kinds of posters of car parts on the wall, most of them don’t know what they are looking at, so why do we bother? When we sell more fan belts in one month than we do the rest of the year because of the spiff from the supplier, are we actually solving the customer’s dilemma I described above? May as well be a Martian selling an “ICMDS” for your space ship.
Breaking Down the Numbers
Let’s go back to the beginning. It is a fact that most people need a vehicle in our society today; good thing, since we choose to invest our career, time and money to be in this business. The reality is, most new vehicles are going to cost $20,000 and up to buy, but this is where we begin to tell the story differently. Using the example of a car that costs $30,000, with a down payment of $6,000 and $400 a month in car payments, multiplied by 60 months, it equals $24,000. As well, you will also have service and maintenance bills anyways.
So what I am suggesting is that we show our clients the value of keeping their cars for five or 10 years more. On the outside it is going to cost them $2,000 a year on maintenance and repairs. That allows for keeping that vehicle in like new condition. Multiply that by five years, which equals $10,000. That is a net savings of $14,000 over each five-year period the client keeps the car past the initial five years. Multiply that by two vehicles and that equals a savings of $28,000 for each five-year period. Divide that by 60 months and it equals a savings of $467 a month. There are not too many service providers in any industry that can save their customer that kind of money and earn those kinds of sales for the business. The more important result is that the car starts every morning, rarely breaks down and gets them where they want to go any time they want. All the service and repairs are budgeted and planned for and even though the vehicle continues to lose value, it is only a method of transportation and saves them money by not always replacing it.
Now imagine your shop with a fresh paint job. Add some nice flooring in the waiting area, good customer seating, tasteful artwork on the walls and good music playing. Do your best to have a door separating it from the noises and smells of the shop. Imagine a team of highly paid technicians whose goal is to see that the vehicles they are working on will last for 15 years with the same reliability as a new one. Their goal is to squeeze every kilometre possible out of that car, not get a Loonie for every belt they sell. Imagine a professional service advisor having the ability to explain to your clients your desire to keep their best interest at heart, which is to reduce and manage their cost of transportation. At that point, in a calm and organized environment the conversation will include topics like brakes, shocks and struts, and timing belts. However, the difference will be that your clients will only need to understand how those things make the vehicle last longer, stay reliable, ride and drive like it was new, and be safe. You will be able to use quality parts and be paid well for your skills and expertise.
This is the way to differentiate your shop and build referrals. Referrals are the strongest form of marketing, but take the most work to develop. This article is the beginning of your journey into a whole different world of automotive service and maintenance. Your competition will not be able to touch you.
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