Auto Retailers: Take the Lead in Resolving Vehicle Recalls

The continuous stream of automotive recalls presents a perpetual opportunity for dealership revenue, customer service and customer safety. The question is, “Are dealers willing to take a lead role in helping reduce unrepaired recalled vehicles?”

Automotive recalls have dominated headlines recently. From NHTSA urging an auto supplier to recall 67 million airbag inflators to a major OEM recalling nearly 700,000 vehicles for potential injury to children due to a defective seat latch, one thing is abundantly clear: vehicle safety recalls remain a significant challenge for the auto industry.

More than 900 vehicle recalls affected more than 30 million vehicles in 2022. The entire situation is like the old arcade game Whack-a-Mole. Every time the industry takes care of one problem, another one pops up.

As a result of so many recalls flooding the market, there is a high percentage of unrepaired vehicles in consumers’ driveways today. According to NHTSA, the vehicle repair rate was only 52% for recalls issued in 2021, and from 2011 to 2021, the recall completion rate hovered between a low of 52% to a high of 72.9%. That leaves millions of unrepaired vehicles on our roads today, putting people needlessly at risk.

This brings up an important question. Who is responsible for getting these vehicles fixed? OEMs certainly are playing a role, issuing recalls and making attempts to reach out to vehicle owners. Despite its role as an advocate for consumer safety, NHTSA has no direct relationship with customers, limiting its outreach ability.

Dealers Are the Logical Choice

At the recent Automotive Recall Summit in Livonia, MI, Alex Ansley, chief of NHTSA’s Recall Management, urged dealers to play a larger role in helping solve this systemic industry challenge. With a direct link to vehicle buyers, dealers are perhaps in the best position to affect recall repairs. They are on the front lines and can help bring customers into the dealership.

Hearing this, many dealers may step back and say, “Why us?” Dealers already have enough on their plates trying to survive and thrive in a competitive marketplace. And OEMs are the ones who build the vehicles in the first place.

But savvy dealers will see a significant strategic advantage to help solve this challenge. It is not only an opportunity to promote goodwill with consumers and help keep them safe but also an opportunity for service retention and revenue generation – there is no downside.

First, identifying and fixing recalls limits dealer liability by reducing the chances of inadvertently selling a vehicle with an unrepaired safety recall. Of course, dealers want to provide service excellence to their customers and to avoid selling recalled vehicles in the first place (many are missing recalls and don’t even know it).

In addition, recall repairs create incremental service revenue from warranty repair reimbursements. According to NADA, the average recall parts and service repair reimbursement is $440. Finally, recall outreach helps dealerships create a deeper relationship with customers by alerting them to, and then fixing, open recalls at no cost to the customer.

Most dealers, unfortunately, are unprepared to take advantage of the opportunities provided by open recalls. In general, dealers lack a written policy to guide their recall strategy. In addition, too many dealers rely on manual processes to identify vehicles with open recalls. Given there are nearly 2.5 new recalls on an average day, it takes far too much staff time to manually check every vehicle on the lot, every day, or every customer vehicle they’ve sold, against every available resource in the industry.

Dealers who turn to an automated process can take advantage of and help reduce the number of open recalls on the roads today. According to AutoAp research, nearly 15% of a typical franchised dealer’s new- and used-vehicle inventory has one or more open safety recalls. Best-practice dealers manage to reduce this ”open rate” to about 2.5%.

If dealers do not proactively identify these open recalls, they are leaving themselves exposed from a liability standpoint. They also are leaving money on the table by not taking advantage of recall repair reimbursement.

Another source of open recalls includes vehicles sold in the past several years. Just because a vehicle was clean when it left a dealer’s lot, it might not be today. More than 20% of customers’ vehicles have an open recall.

This is where dealers can play a significant role in helping reduce the overall number of vehicles with recalls. Proactively reaching out to these customers and getting them into the dealership drives revenue and builds better customer relationships. It’s a win-win for everyone.

Mark Allen

If dealers take the wheel, they can strengthen their businesses and help the industry significantly reduce open recalls simultaneously.

Mark Allen (pictured, above left) is president of Auto Ap, a provider of safety recall management software.