Rental Departments are Profit Centers Too

In your continuing effort to bring products and services to your dealers, have you thought about suggesting they add a rental car department? Dealers are concerned about maintining a high CSI and they are always looking to provide profits to the bottom line. A rental department can do both.

According to the Auto Rental News 2011 Fact Book, “The car rental industry achieved record rental revenue in 2011, though with an average fleet size of only 1.76 million. That translates to revenues of $1,060 per unit, per month.”

This is the industry norm, which means many operators are doing much better. Imagine a dealer with a rental car department doing that much rental revenue and still have the car to sell at the end of the month.

But how exactly will adding rentals help your dealers make more money? There are several answers to that question. Let’s take a closer look at three:

1. They’ll Supplement the Inventory.

The second a vehicle is registered, it becomes “used.” But the units a dealer adds to his rental fleet can be from the current model year or the year before, or even the year before that. And frankly, unless there has been a redesign, a rental line stocked with those vehicles looks no different than a row of all-new cars.

Imagine that a customer drives in to trade his current-year or one-year-old car in for the next size up or down. Unfortunately, there is no more money the dealer can put into the trade to make the deal. Most dealers would let the guy walk.

If the trade-in can enter rental service, it has a chance to earn money until it becomes attractive to the used-car department. The customer is satisfied, a good unit is added to the rental fleet and, later, the used-car manager gets a great car for the front line.

But It doesn’t end there. Now the dealer has a “switch piece” to sell to the customer who can’t spend what it takes to buy a new car, but would not mind buying a current model with a few miles on it. The dealer might take a trade in on that car and the wash ticket is starting to build.

If the process is repeated four times a month, the dealer will sell 48 more new and used units than he would without the rental department. Now tell him to ask his controller how many advertising dollars he would need to spend to boost sales by that number.

2. They’ll Add Service-Lane Business.

There are two kinds of service writers: The typical service writer does just that — writes down what the customer says and leaves it at that. The proactive service writer looks for opportunities to sell.

In the service lanes, selling means helping someone make a decision or solve a problem. When faced with the option to repair, the customer wonders, “How will I get home today?” and “How will I get to work tomorrow?” But they’re more likely to say, “Okay, let me think about it.” If the service writer lets them go, your dealer just lost the repair and the customer now has time to visit other shops.

With a rental department on the property, the dealer has the luxury of including a one-day rental with the diagnostic charge. Problem solved! And remember that incremental sale thing? Write one extra repair order a day and the shop will generate five or six repair orders per service writer per week.

3. They’ll Eliminate the Hassle of Partnering With a Rental Agency.

Many dealers are doing just fine with skilled service writers and no rental department. But they’re often forced to bring in loaner vehicles from the nearest rental car company. If they don’t comp the rental, the customer is forced to write a check to another company. And that’s after having to wait around for an hour!

Worse yet, there’s no telling what the rental car company will deliver. If your dealer sells Fords, she might not want her customers driving a Toyota for a day, and vice versa.

My advice is to take your dealer for a walk through the body shop. Grab the current repair orders out of the bin and call the customers. They will tell you who they rented from and you’ll see who is capturing your dealer’s lost revenue.

Stay tuned to this channel for more tips and ideas about how rental cars can improve your dealers’ bottom lines.