Thoughts, Reflections and Advice from a person with experience in computers, financial concepts, and the used car industry. Comments and Discussion are welcome. Please read Disclaimer Page
THE TIP YOU HAVE ALL BEEN WAITING FOR
Free. Oil. Changes. That’s your key to profits. Did I mention they should be free?
Free? You may ask, and I say yes, free. Here’s the math: The average costof an oil change is about $20-$25. This includes the labor to do it. You can get that cost considerably lower buying both oil and filters in bulk.
Seriously, bulk oil comes in around just $1.50 per gallon. That’s just $2.25 cost for a 6-quart oil change. Filters are between $2 and $4. You would then have just $6.25 in parts, worst case. Figure 30 minutes for a $15/hr employee, and the total in this is just $13.75. Add in disposal fees, employee taxes/benefits, and the tiny cost of the other fluid top-offs, and you will be under $20 for every one.
If you do not have a shop, come to an agreement with the local Quick-lube or tire store that does them for $24.95 normally. You can probably negotiate a deal down a few bucks.
The average oil change should be done at 5000 miles. The average driver puts 15,000 miles a year on a car, and the average BHPH contract is 36 months. The math says that is 9 oil changes. Total cost is 9 x $20 = $180. That’s not a lot of money to put into a unit for sale.
Why? Well, there are a handful of reasons. The first and most important is that you are protecting your collateral. YOU are probably the only one who is genuinely interested in making sure the oil gets changed. You are the one who truly has a vested interest in making sure the engine runs until the car is paid for. Bonus: If you do wind up with the car back again, through trade or repossession, you know that the service has been kept up with.
Reason #2 is that you now get nine opportunities to inspect the car, and look for other potentially bad issues. You get the chance to tell them before they are stuck beside the road that the water pump has started leaking, tires are showing cord, brakes need replacement, or a steering knuckle is worn out. You are taking care of your customer. If you have a profit-shop, you can offer to go ahead and repair these items, and work them out a plan on the bill. If you do not have a profit-shop, then arrange a discount plan with a nearby general mechanic or tire store. You will also be the first one to spot when this car isn’t going to last much longer.
Reason #3 is that you get nine opportunities for this customer to look over your lot and look at inventory. Either they are looking to trade up, or they have a friend looking for a car. Maybe a friend rode with them who wants to put in a credit app.
You get nine chances to shake this person’s hand and thank them for their business. You have nine golden opportunities to remind this customer that you are taking very good care of them after the sale. At least half of these times, the salesman who sold the unit, or his/her replacement, should be gently but gradually steering this person towards their next purchase, and always asking for referrals.
This builds business. This builds good will. This builds a reputation of a dealer who wants his customers to be happy.
Don’t stop at the oil and filter. A decent but inexpensive set of wiper blades is only $8. Air filters range from $4 to $20. If you have a permanent on site clean-up crew, let them wash it off. These are all very cheap investments in your business. You will NOT be able to buy the kind of advertising this will get you.
The customer will need to understand that this service does not constitute warranty, in any shape or form. They need to understand that this is not guaranteed service, and can end at any time. If you want to pass on your cost to the consumer in the form of a “Maintenance Contract,” make sure you understand the laws and rules surrounding those before doing so. Spoiler alert: It gets nasty, and is not recommended.
The cost could be a deductible expense, if categorized properly. Ask your accountant. I do not advise that you pack the estimated cost onto the car as a repair or reconditioning expense at the time of sale. These need to be accounted for as they happen, not as a projection.