The used-car business’ reputation has made big strides since the stereotypical shady salesman wearing a loud sport coat, haggling endlessly with customers on a concrete slab with a ramshackle trailer over a vehicle that may end up being a lemon — leaving a sour taste in buyers’ mouths.
Today, customer satisfaction is a key battleground in the pre-owned arena. Driving this change, in part, are the big specialty used-car retailers as well as startups that continue to disrupt the industry and provide stiff competition — especially for online shoppers — to the incumbent franchised dealers who rely on these vehicles for a significant chunk of their profitability.
The biggest of them, CarMax, is turning up the heat even more. As David Muller reported, the company is increasing its money-back guarantee on its vehicles to 30 days after purchase, up from the previous seven and a far departure from the common three-day return policy. It now offers 24-hour test drives for its vehicles.
The industry would be wise to learn from CarMax’s “Love Your Car Guarantee.” The retailer is confident in its market research that predicts it won’t lose much in terms of expense, but it doesn’t take in-depth analysis to ascertain that value-adds that offer peace of mind mean happy, loyal customers — customers who likely will be more receptive to higher prices and maybe even no-haggle transactions. And higher prices should mean better margins. It’s a win-win.
And the battle for consumers’ hearts doesn’t end with CarMax. Hungry upstarts such as Carvana, Shift and Vroom have visible, national ad campaigns that cast aspersions on the traditional car-buying experience — speaking to those who still harbor ill feelings based on experiences by family, friends and themselves.
To be sure, franchised dealers and their automaker partners are committed to boosting their used-car CSI scores.
Vehicle demand is hot and supply is scarce, pinched first by last year’s COVID-19 shutdowns and now by the global shortage of microchips. The resulting scarcity of new models and record-high average transaction prices is pushing more and more customers to the used-auto lots.
In this competitive environment, everyone is going to have to step up their game.