Working with a high-line product launch in the early 1990s in Canada, we developed a service model that included a dealerships vehicle-loan program.

The dealers were focused on providing the highest level of customer service to ensure they got off on the right foot.

After all, not one customer had an expectation of what to expect, because up to this point no vehicles had been sold. The new dealers let their imagination go. I remember one was so passionate about starting correctly.

He purchased a brand new rollback and offered pick-up and delivery service using the rollback so as to not add miles to the customer's cars. Success has baggage. The last I heard he was up to two rollbacks and still could not keep up with the demand.

Loan cars have changed our lives. I remember when I was in the dealership (mid 1980s) our general manager was so proud of a sticker he developed. Placed on the front page of the vehicle's owner's manuals, it read “WE DO NOT LOAN CARS.”

He told me that would take care of everyone asking us for one. How things have changed.

Loan cars are a two-headed monster we've created. It was our competitive advantage for many years over other dealers and independent repair shops.

It was a fantastic sales point that effectively closed deals. In the Toyota, BMW, and Saab dealerships where I started my automotive career, we had loan cars.

We were in a little community outside Baltimore, and we had six drivers. All they did was shuttle cars back and forth in the metro area. Our dealer was ahead of his time with loan cars. We lived the success and failure. When the dealership was sold, our old dealer made it a point to make the new owner maintain the service for three years afterwards.

The new dealer had a plan: make the entire loaner fleet Toyota pickup trucks, thinking the BMW owners wouldn't drive them, and so pass up the offer.

Guess what? They loved them! The weekend take-rate had a waiting list. I had three drivers picking up vehicles at the same brokerage firm. One driver braked suddenly. All three trucks were involved in the chain reaction. Not a pretty sight. It's the reality of pick-up and delivery service.

So, how do you handle your success? Some dealers have answered the call by adding more cars to keep up with the demand. Some high-line stores have 400 plus cars and counting! I don't think that's the answer.

We need to lower the number of loaners and increase the level of service. I have talked with a lot of customers who truly appreciate the loaners. I think we are working backwards though. Consider the following:

Hassles

Some customers feel uncomfortable driving loan cars. The other issue is the transfer of personal items. We all make ourselves at home in our cars. It's difficult to do that in a loaner. The biggest issue is the parent with small children. The car seat is a major obstacle.

I asked several parents, and the consensus was that, in lieu of a loaner, they'd gladly give up an hour or two of their time waiting for their cars to be serviced.

What if we could change the process to offer these customers the option of a quick service in which they wouldn't have to leave their cars and could wait at the dealership?

Abuses

Loan cars are a great way for the advisors to work their pay plans. I have seen advisors schedule loan cars for customers knowing they could not touch the car for days, but were motivated by the commission.

It happens every day. How do you minimize it? First, the objective of loan car is to turn the cars quickly. To accomplish this requires daily measurement and management of usage. Require the service management team to provide the dealer or general manager with a cars-out report each morning. It should include estimated time of service completion.

If a vendor provides the cars, require them to provide you with this report daily. I have seen some dealership's paying out $50,000 a month to outside vendors. If you use a vendor, your business is worth something? I have clients who have asked for and received rental days that are free, based on the number of monthly rental days purchased. It never hurts to ask.

Liability

This may sound basic, but no car leaves without a completed loan agreement the customer signs. This has happened to many stores: the customer didn't sign the agreement, then trashed the car. No excuse should be accepted. This means all customers, including FOBs (friends of the boss), must sign.

Loan cars can be an asset to your dealership. But it pays to manage them proactively.

Lee Harkins is president and CEO of M5 Management Services Inc. You can contact him at 205-747-8305 and leeharkins@m5ms.com.

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