What Happens When Recalls Start Influencing Buyers?

With the massive onslaught of vehicle recalls it is pretty much guaranteed that all parties involved are paying attention. Today that ranges from consumers to OEMs to dealers to insurance companies; and tomorrow that will soon include rideshare companies like Uber and Lyft.

One of the biggest, and perhaps most well-known recalls, is unrepaired Takata airbags which could explode upon vehicle impact. As you can imagine, an exploding airbag is of grave concern to consumers. It is also a major financial liability to the automotive and insurance industries. Due to its massive scale, this recall is exacerbated by lack of parts availability and, while the media feeds consumers stories of death and destruction because of failure to repair these airbags, consumers are faced with long delays and heightened anxiety.

No matter how hard you work to disclose an open recall to your customers, there may come a time when customers start factoring recalls into their buying decisions, based on the barrage of problems, delays and parts availability.

Tools to check a vehicle’s VIN for an open recall are accessible to consumers, who are likely to consult them while perusing your used car inventory. Because of this, regardless of whether it’s legal to sell a used vehicle with an open recall, that vehicle may still end up sitting there on your lot simply because nobody wants to buy it.

Let’s take a look at how open recalls will affect a future buyer’s decision-making process:

 

1. Conquest – Oh, you better believe that manufacturers with vehicles that aren’t affected – or less affected – by recalls will ramp up advertising to let consumers know just how safe their vehicles are. That loyal brand customer may start rethinking their loyalty should an attractive conquest offer appear. And those messages will be a ruthless assault on unsafe vehicles with deceptive sales practices labeling your dealership as a hungry wolf feasting on unsuspecting consumers.

2. Peace of mind – Consumers are bombarded by recall messages daily — horror stories about the danger of leaving their vehicle unrepaired. Combined with the long wait times to secure the recall repair, whether they’ve been personally affected, or someone they know has, this certainly affects their state of mind. Most consumers don’t have the time, patience or willingness to wait indefinitely for a repair, or to buy and drive a vehicle that could potentially injure, or even kill them. And that makes perfect sense.

3. Cost to own – It’s easy to see a future where insurers start factoring recalls into their complicated algorithms for calculating policy holder premiums. Checking insurance costs with your insurance agency is one of the first steps in choosing a vehicle and establishing if it is within budget.While it does not currently happen, imagine the day when insurance agencies increase premiums on vehicles that are unsafe and could potentially cause an accident – especially those defective vehicles that have dangerous and life-threatening recalls. This could certainly impact whether a consumer buys a vehicle, or starts their search for an alternative.

4. Worry-free Inventory – Dealerships love the advantage of offering a “certified pre-owned” vehicle. Those vehicles typically yield better margins and create a loyal customer who will return for their next purchase. If that’s the case, how would you describe inventory that does not fall into that category? Diminishing margins force dealerships to carefully examine the kinds of vehicles they bring into their inventory.  Imagine if your dealership had the tools to evaluate resale value, prior to acquisition.

 

During trade in evaluation, or at auction, wouldn’t your inventory manager benefit from knowing what that vehicle’s recall status is? Those tools are available and your dealership needs to take an active role in presenting your prospective customers with a better selection of used vehicles.

More than likely, the biggest roadblock in NOT selling used cars with open recalls has been the financial impact dealers face in terms of tied up capital, space to store vehicles while awaiting a recall repair, and lost sales from sitting on those vehicles waiting for parts and repairs.

Large auto retailers such as AutoNation initially took strong positions on recall management.  However, the group changed its position and decided to allow the sale of used cars with recalls when they realized the burden these recalls levied on their dealerships.

Still, the fact of the matter is that consumers only care about one thing: the vehicle they are buying right now. They’ll take action and vote with their dollars before any massive industry change or government intervention.

I’ve mentioned in my past blogs on several occasions how pending legislation which prevents dealers from selling used cars with open recalls is on the horizon. At some point, the issue is unavoidable.

You have a unique opportunity to proactively address a matter that is important to consumers.  In an era where dealerships search for market differentiation, the stage is set for savvy leadership to outpace slow competitors who would rather adopt policies when they reach a critical state, or are mandated from some higher authority.

Which kind of dealership is yours?