Keys To Loaner Fleet Profitability

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BY LAURA TIERNEY

Sales Director at ShopLoaner ltierney@shoploaner.com

I speak with several shops a day about service loaner fleets. While some of these shops run 10-20 loaners or more, others are working to understand why they should have loaners at all. I have found the shops that have large loaner fleets have realized loaners can increase both average revenue per RO as well as total RO revenue and car count. For example, one of our customers, John Cayer at Premier Auto Repair, recently experienced an 85% increase in average RO and increased his car count significantly by adding loaners. His experience was so positive that he quickly increased his fleet from two to seven vehicles. What I try to do when I speak to shops is to explain the keys to achieving similar revenue results while also ensuring costs and risks around loaners are minimized. Below I provide a summary of some keys to ensuring shops maximize the return on their loaner fleets.

Maximize Fleet Utilization

The primary key to maximizing the value of your fleet is to ensure you have high fleet utilization. You do not want to have cars sitting on your lot since each vehicle in your fleet represents a revenue stream. Keep the cars moving. Shops do this by advertising the availability of loaners to bring in new customers and minimizing the number of days a vehicle remains with the customer after the RO closes out. As a best practice, we recommend shops clearly state on the rental agreement that a customer will be charged a certain rate/day for each day they keep the car after they have been notified the RO is closed out. Adding this notice goes a long way to ensuring cars get returned quickly. One of our customers servicing high-end luxury brand stated their overdue vehicle days decreased over 90 percent once the customer realized they had to pay for driving the car beyond the RO closeout date.

Keep Track Of Incidentals And Charge When Appropriate

Fuel and vehicle damage are costs that the shop will absorb if the check in/check out process does not ensure fuel levels and pre- and post-rental damage is checked and recorded. Tolls can also be extremely costly if not monitored closely. We recommend that each loaner agreement state in bold language that the customer will be charged for fuel used, vehicle damage (including smoking), excessive cleaning and any tolls. Tolls and tickets can be tricky as they most likely come in after the vehicle is returned. We recommend taking a credit card and authorizing a predetermined amount on the card via a PCI compliant service. If a toll or ticket appears later, the card on file can then be charged.

Advertise The Availability Of Loaners

One thing is very clear: customers love loaner vehicles. Although independent repair shops vary in how they track customer satisfaction, car dealerships are very focused on this issue. They measure it using an industry metric – the customer satisfaction index, or CSI. Dealer service departments know that a higher CSI translates to more service revenue and higher customer loyalty.

Loaners also help expand your geographic footprint. We have heard from shops about customers bypassing their garage to drive to a shop farther away because the competing shop advertised, they provided a loaner. The promise of a loaner was enough for the competition to poach customers who would normally take their car to a closer local garage. Furthermore, many customers have longer commutes requiring a car and are not able to easily commute to and from your shop. Providing a loaner allows these distant customers to utilize your services without major disruptions to their schedules.

Providing your customer with a vehicle also increases your share of the local market. Obviously auto shops compete for customers. Why a customer comes to your shop versus another shop is driven by several factors including perceived expertise, your shop’s reputation, and convenience. Loaners are part of the convenience factor. Customers need to get to work, take their kids to practice and go to the grocery store. Providing a loaner alleviates all the convenience barriers to a customer bringing their vehicle to your shop.

Conclusion

Investing in a loaner fleet is an important decision. While issues like correct fleet sizing and fleet utilization are critical, loaner vehicles are proven to increase revenue, drive customer satisfaction and build customer loyalty. As shops look for new ways to build revenue and differentiate themselves from the competition, service loaners are an avenue that shops should be exploring.