Effectively Using a Loaner Fleet

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Acura of Peabody (Mass.), currently boasts the best CSI score (93) in all of New England among that OEM’s dealerships. A key component to the store’s success: complimentary loaner vehicles, according to general manager Joel Avery.

These days, Avery’s employer spends nearly $400,000 per year on its 40-vehicle loaner fleet, but that sizable expenditure is well worth it, the GM says.

“There’s two ways to look at it,” Avery notes. “It is a lot of money, but if I’m spending  $30,000–$35,000 per month and I can keep my customers―I can keep my process ‘no appointment necessary’ because I always have loaners―then the good outweighs the bad. It means I’m making more money in service.”

Many dealers lose thousands each year on their loaner fleets but view them as a necessary evil, because the programs do typically aid in customer retention following incidents like comebacks or recalls.

“The problem a lot of dealers have is they’re not managing their fleet properly, and they’re losing business over it,” says Avery, whose service department writes around 1,560 ROs per month. “If you don’t have a loaner available for a customer, [and] you tell them, ‘I can’t get you in for a week because of loaner availability,’ they’re just going to go to an independent, or another competitor.”

Truth be told, there are multiple ways to make courtesy vehicle programs truly beneficial for your fixed operations department. Fixed Ops Business spoke with multiple dealerships, seeking their advice for how to make a loaner fleet program work as smoothly as possible. Below, are the top three most commonly shared sentiments.

 

Keep Your Fleet Controllable.

A fleet can get downright unwieldy―and cause you increased headaches―if it gets larger than your staff can comfortably handle. Factoring in elements like staff size and property size, many dealerships find a fleet of 20–40 loaner vehicles to be manageable.

A fleet that’s limited to a few dozen vehicles allows for all necessary dealership employees to keep tabs on complimentary vehicles and get them prepared in advance of customers who reserve them.

“Control is probably the biggest thing,” says Tim Scully, the service director at Larry H. Miller American Toyota in Albuquerque, N.M. “We have a shared spreadsheet, so we know what customers are in. … We see those daily rental logs, so we know who is out, and what vehicle is where.”

At Acura of Peabody, Avery utilizes TSD fleet management software, which alerts him via email if a loaner vehicle has been away from the dealership for three days or more. Avery also employs a service concierge who helps keep tabs on courtesy vehicles.

Another possible solution for keeping tabs on loaner vehicles is to assign a small amount of the courtesy cars to each service advisor.

 

Cover Your Assets.

On the surface, utilizing a loaner fleet might not seem worth the hassle, considering the potential costs involved, like spending a few hundred dollars per month, on average, to service a vehicle, and hiring an additional employee or two (like a lot attendant). And, while facilities with loaner fleets tend to have CSI scores well into the 90s, a courtesy vehicle program can also cause stress induced by factors like insurance.

That’s why it’s important to clearly state your dealership’s policy with regard to loaner vehicles. At many facilities, customers are required to display proof of insurance before receiving keys to their complimentary car, in addition to signing a form that’s recognized as a legal document. Some stores won’t set up customers with a loaner vehicle unless they have comprehensive coverage.

Additionally, some dealerships, like those under the Toyota umbrella, retain their own additional track rental insurance coverage, protecting them in case of a customer accident involving a loaner vehicle.

 

Monitor Financial Figures Closely.

If your dealership’s employees don’t closely observe the numbers associated with a loaner fleet, the courtesy program can come back to bite you. For example, if you don’t sell loaner vehicles before they’ve accumulated roughly 30,000 miles, they become difficult to adequately recondition and sell for profit. Avery, for one, cites depreciation as a large chunk of the nearly $35,000 per month that loaner vehicles cost Acura of Peabody.

But, if a dealership flips its loaner vehicles early enough―likely after roughly 18 months in their possession―even departments like parts can receive money (albeit internally), because these vehicles typically require upgrades like brakes before they can be repurposed as “certified used” cars.

“We try to turn the cars through our inventory quickly, because it’s a good opportunity for used-car sales,” notes VJ Donnelly, the general manager at MetroWest Subaru in Natick, Mass.

Ultimately, many dealership leaders agree: A loaner fleet is usually worth the investment, because such a program helps you thoroughly control your customers’ experience at your dealership.

“You don’t want to get into a situation where you have no available loaners for customers,” Avery says, “because then you’re going to start losing the customer; they’re just going to call some place else.”

 

Typical Policies 

Here’s a look at typical elements of dealerships’ loaner vehicle policies, to which customers are required to adhere:

- Often, the program pertains strictly to factory-scheduled maintenance.

- Proof of insurance is usually a prerequisite.

- A valid driver’s license must be presented.

- Vehicle must be returned with same level of fuel as when received.

- Services requiring less than 60–90 minutes don’t often qualify for loaner vehicle use.

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