Dealers turn to additional products to boost revenues

Most used car dealers are offering a wide range of additional products and services - in addition to consumer finance products - to bolster their margins.

​Our latest sentiment survey reveals that nine in every ten dealers promote at least one additional product or service. Extended warranties are the most popular with four out of five dealers saying they offer this product, while three quarters also promote paint protection. The same number promote service plans, while 69% offer a GAP insurance product. Over half (54%) now offer a tyre protection product to customers, slightly more than those offering upholstery protection (50%).

The popularity of extended warranties is no doubt in part down to them offering dealers the best opportunity for additional margin. Over a third of dealers (35%) cite this product as offering the best return. The same number rank paint protection as having the best potential for profit. Just over one in four dealers (27%) say service plans offer the best margin, while 23% rank GAP insurance highest.

NextGear Capital sales and marketing director Pam Halliday comments: "It’s telling that almost all used car dealers now offer a range of additional products and services to their customers. These products are not only an important component of a dealer’s ability to offer a rounded, positive customer service experience, but they also represent a vital opportunity to generate additional income over and above the margin on the vehicle itself.

"This is becoming increasingly important as the used market proves competitive, with wholesale prices holding strong and consumers entering into a negotiation armed with plentiful information about comparable vehicle prices and high expectations of a vehicle’s condition. This all combines to put pressure on margins and forces a focus on cost and additional revenue opportunities.

"It’s reassuring to learn though that those products most popular with customers - paint protection, extended warranties, service plans and GAP insurance according to the survey – are also those offering the best return. It shows dealers are aligned with customer demand and not pushing products simply for the return they offer. Rather, these are desirable products with a legitimate value, offering the consumer protection and peace of mind."