April OEM & Dealer Incentive Playbook
April OEM & Dealer Incentive Playbook

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As the COVID-19 restrictions continue, automotive retailing is experiencing guarded consumer activity that has manifested itself in avoiding shopping at dealerships, taking test drives and processing paperwork on site. During the last six weeks, the auto makers and their dealer networks have moved aggressively to shift incentives that promote option/trim convenience packages (the vehicle) to incentive that help the in-market customers feel more confident physically and economically. It’s been some time since the auto world has been this dependent on needs-based incentives as opposed to incentives that play to consumers wants and emotional desires.  

Auto manufacturers are struggling with their own cost viability right now, while simultaneously working to create market demand with a series of financial offers, online shopping and remote delivery incentives. These incentives are helping keep a fragile industry afloat by helping consumers who are concerned about the purchase process feel more confident about shopping, buying and taking delivery of new/CPO/used vehicles through the dealer network.  

Here is a quick assessment of the three key incentives strategies and how well the industry is implementing them. 

  1. Shopping Incentives – Most OEM’s and shopping portals are promoting their online shopping tools (e.g. – FCA’s newly-improved Online Retail Experience; GM’s Shop-Click-Drive; Autotrader and KBB.com’s Accelerate My Deal) to help consumers understand pricing and payment ranges online before shopping actual dealer sites.  

Consumers are now able to better evaluate monthly budget requirements prior to engaging further down the purchase funnel. Likewise, dealers have implemented multiple price and payment tools which help consumers view, engage and structure transactions without having to visit the dealership. These initiatives have the benefit of consistent advertised pricing across Tiers I/II/III. 

Currently the biggest unknown in any deal is used-vehicle values—the trade-in. Recent drops in wholesale values have made the process difficult and getting a true assessment of the quality of a trade-in is difficult at best online. Buyers with lease terminations and agreed on residual values will have the least amount of ambiguity throughout the process. Tools such as Kelley Blue Book Instant Cash Offer (ICO) can help, but still rely partly on owner assessment of the vehicle and can change the deal late in the process. 

Assessment – MAKING PROGRESS. According to recent data from Cox Automotive shopping sites, including Autotrader and KBB.com, website visits were up 14% and vehicle description page views were up 17% over the same period last year. But true click-to-buy capability is still elusive, even from the most advanced companies. 

  1. Transaction Incentives – We are all in the same position of not wanting to overextend ourselves with the uncertainty of furloughs and cutbacks of employment. OEM’s and their dealers have addressed affordability concerns (0% up to 84 months), possible work interruptions (payment forgiveness) and providing the ability to shop, evaluate and transact with financing options using captive and 3rd party lenders (banks & credit unions) from your phone or computer screen.  

These are important steps to support transparent shopping and consumer benefits like introducing finance and insurance products online for the buyers to research as part of their purchase.  

Assessment – WORKING. Data suggests that the many 0% offers are driving traffic and helping close sales. The percent of vehicles purchased with 0% financing has increased from 2.6% in January to nearly 20% in April. Obviously, 0% financing is an incentive that is working right now. 

  1. Delivery Incentives – Auto makers, dealers and marketplace portals such as Autotrader, KBB.com and Dealer.com have introduced 360-degree videos, photo tools, home test drives, sales delivery and consumer workflow leading to electronic signatures where available.  

These fresh initiatives to help facilitate sales in a time of social distancing are reaching new levels of digital shopping and transaction creativity which began nearly a decade ago and will likely become mainstream offerings in the months ahead.

Assessment – IMPROVING. Carvana and Vroom were big first-movers in the home delivery business model which is now being adopted by many dealers; Dealertrack Digital Contracting is up 65% over same time last year and Autotrader’s “Dealer Home Services” has been adopted by more than 10,000 dealers. This is new for many dealers though, so more work needs to be done. 

While our current bear market incentive offerings are different from the OEM/dealer incentives of even earlier this year, we’re seeing consumers react positively to the current collection of finance incentives, electronic commerce tools for shopping/purchasing, and new offerings for vehicle delivery. All these incentives can help stimulate confidence in the vehicle buying process right now, and some of them are also much needed improvements to the car buying process that has been long overdue for the automotive retail industry.

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