1 Way to Reduce Liabilities

Offering loaners or rental cars when vehicles are serviced can help dealers increase customer satisfaction but can strain the bottom line unless managed properly.

Dealers' biggest loaner danger for dealers is increased exposure to insurance and legal liability if the driver isn't properly licensed and insured. Five percent of all dealership losses involve customer loaner and rentals, says Dave Cameron, a risk manager for Federated Mutual Insurance Co.

“Some customers drive without proper insurance,” Cameron says. “And that means dealers have a lot of exposure.”

Says Jeff Morrell, assistant vice president-business development for Enterprise Rent-A-Car, “Dealers often don't think of all of the issues involved with the service loaner.”

Dealers face other issues when offering loaners, including facility, operational and personnel expenses. And there are those dents, dings and cracked windshields.

Because of the increased expenses, many dealers look at loaner car programs as a necessary evil, Morrell says.

One answer may be to outsource the service. Car rental companies such as Enterprise offering such service to dealers assume the liability and handle all of the other issues involved. “Enterprise is able to take that risk from the dealer, because it does so much of this type of business. It's able to spread the risk around,” says Cameron.

Ron Parkinson of the Thomas Holding Co., a 6-dealership group in central Pennsylvania, says it started using Enterprise 19 months ago.

“I offered them real estate at our dealerships because we were convinced they offered a needed service,” he says. Dealers can have Enterprise set up an onsite location, or they can have the rental company pick up customers.

“It's a real seamless experience for the customer,” says Parkinson.

The dealership group received an unexpected benefit from using Enterprise. “They hire young college graduates,” notes Parkinson. “We were impressed with the caliber of people that Enterprise had working in our stores.”

He says the dealer group until then did all of its hiring using the classifieds. “We know how that works,” he says, citing high turnover and low talent level. But seeing the Enterprise people convinced him to start management training for local college graduates. “It's worked out well for us,” he says.