Current State of the Automotive Market
The automotive market has changed drastically over the past few years. Fewer people are buying new cars, and much of that has to do with the considerable spike in MSRPs.
With fewer people buying, it also reduces the inventory available of new cars. Depending on the manufacturer, parts are harder to come by for the factories, which means that fewer cars are being produced. Some makes and models are available only by custom ordering them at the dealership. As costs are high and inventory is low, many people are turning to used cars as the best answer for their budget.
Additionally, as many states start to regulate gas-powered vehicles, the EV market is growing substantially. As such, EV sales are growing by 60%, which encompasses approximately 10% of the market share in 2023 – up from 7% in 2022. (PCMag.com)
The cost of cars has drastically changed as well – both new cars and used cars are both more expensive than ever – which means that consumers need to focus on value more than ever before. The average cost of a new car, according to Kelley Blue Book, is now $49,500 – and that’s up 5% since 2022. The average cost of a used car that is between one and five years old is $34,291 – and all used cars hold an average of $26,510. That’s a considerable amount of money considering that it is used, and many people still remember buying a new car for that amount. Most consumers can’t afford a brand-new car off the lot, or a costly mechanical repair if their used car has significant issues.
Average Age of Cars on the Road
With the high cost of cars, many people are being realistic about how long they’re going to keep that car. The average age of the cars on the road is 12.5 years, according to S&P Global Mobility.
What this means is that when a person buys new, they are likely to keep the car for at least 10 years, including those who buy a used car that is two or three years old. Understanding that many cars on the road are at least 10 years old is critical for your customers. While they may go into the sales process assuming they will keep the car for a few years and move on, the economy may not allow them to do so.
Inflation on cars has been around 9.2 percent based on the Consumer Price Index – and that’s about two percent higher than the current inflation rate. This means that the price of buying a car is higher, but so are other aspects of vehicle ownership. Vehicle maintenance and repair costs have increased by approximately 12 percent from November 2021 to November 2022. Vehicle service contracts are affordable compared to the cost of most mechanical repairs, and they are also a fixed-cost expense. It allows customers to lock the price in NOW, despite what the cost of repairs may be six months or a year from now.
Customers need to understand that their vehicle is a long-term investment that needs protection from breakdowns that can shorten the lifespan of their vehicle.
Why a Vehicle Service Contract is Important for Protection in Today’s Economy
Vehicle Service Contracts provide financial protection against many of the things that can happen to a vehicle.
Today’s economy is extremely volatile due to high costs, low inventory, and inflation in the cost of goods and services. For many consumers, this makes a VSC covering mechanical issues in a vehicle worth the slight cost.
VSCs are affordable compared to the cost of most mechanical repairs, and they are also a fixed-cost expense. It allows customers to lock the price in NOW, despite what the cost of repairs may be six months or a year from now.
Finally, VSCs are often transferable, and this adds to the overall resale value. Considering how used cars are so highly sought after in today’s economy, having a VSC attached to it makes it even more desirable.
Ultimately, your customers need to understand that a VSC is one of the best investments available to them. It provides protection and certainty in an economy that is anything but certain.
Educating your Customers about their Vehicle Service Contract Options
Vehicle service contracts provide protection against many of the mechanical breakdowns that can happen to a vehicle over time. Today’s economy is extremely volatile due to high costs, low inventory, and inflation in the cost of goods and services. For many consumers, this makes a vehicle service contract covering mechanical issues in a vehicle worth the slight cost.
Ultimately, your customers need to understand that a VSC is one of the best investments available to them. Your customers need to trust you for all of their automotive needs. With a vehicle service contract, you can provide them with added protection and peace-of-mind.
At Automotive Product Consultants, we offer automotive, RV, and powersports post-sale marketing programs at no-cost to dealers. These programs market to your customers and educate them about the benefits of buying additional coverage from your dealership.
We encourage dealers and agents to contact us to learn how Automotive Product Consultants can power a post-sale vehicle marketing program that will drive sales and revenue for your dealership. Reach out to us today for a free program demo.
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The Difference Between a Warranty and a Vehicle Service Contract
Dealership, Marketing, Parts and Service, Sales, Service DriveWhether you’re thinking about buying a new vehicle or simply extending protection on your existing car, manufacturer’s warranties and vehicle service contracts may be fresh on your mind. While both services can be helpful, it’s crucial to understand the key differences between the two options.