Dealer Best Practices:
Loaner Car Operations as
a Center of Excellence
W H I T E
P A P E R
AUGUST 2014
A Unique Courtesy Car Solution, Designed with Dealers, for a Superior Customer Experience.
1.888.529.7556
[email protected]
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Table of Contents
Executive Summary
Page 2
Loaner Car Operations: A Critical Part of Dealership Profitability
Page 3
The Customer Challenge: Does the Loaner Program Deliver a
Superior Customer Experience?
Pages 3–4
The Dealership Challenge: How Can a Loaner Program Deliver
Greater Profitability and Control?
Page 4
Converting the Loaner Car Problem into a Center of Excellence
for Your Dealership
Pages 5–6
Conclusion
Page 7
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Executive Summary
Most dealerships in the U.S. have not yet found a way to make their loaner car operations a key part of
their profitability and customer satisfaction strategy. These loaner programs can be the third highest
expense inside a dealership after the cost of rent and people, but, handled poorly, they can end up costing
the dealership money and damaging the relationship between dealer and customer.
Dealers feel that loaner car operations are outside their core competencies and they do not want to have
to increase costs by hiring the skills needed to operate a successful loaner program. There are costeffective solutions that don’t require adding employees and increasing spending. Implementing an easyto-use software/app-based solution can help dealerships bring their loaner vehicle operation in-house and
transform it into a center of excellence that is both a new source of revenue through cost recovery and a
powerful customer satisfaction builder.
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Loaner Car Operations: A Critical Part of Dealership Profitability
As part of a drive to gain better control over the customer experience and increase CSI, a growing number
of dealerships across the country are looking for ways to transform the often problematic loaner car
experience customers encounter when they bring their vehicles to the dealership for service. Loaner car
programs, whether outsourced or handled in-house, can be the third highest expense inside a dealership
after the costs for people and rent.
Dealerships are in the business of selling and servicing cars. Loaner car operation management is
something that they view as being outside the realm of their core competencies. For this reason, few
dealerships have recognized the potential that loaner car operations have as a source of revenue.
Explains Brad Nicklin, Partner, Baker Tilly, an accounting and business advisory firm that provides
services to dealerships across the country ,“Because it is not their core competency, dealerships have
typically not focused on their loaner car operations and management, so they haven’t seen the benefit to
creating a center of excellence around loaner vehicle operations.”
However, with the right tools and processes in place, loaner car operations do have significant potential to
function not only as a center of excellence inside a dealership that improves customer experience and
boosts CSI, but also as a new source of potential revenue through cost recovery.
The Customer Challenge:
Does the Loaner Program Deliver a Superior Customer
Experience?
Customers value two things: Their time and a no-hassle experience. Building a solution that values these
two customer-centric beliefs is imperative. Jim Willard, Service and Parts Director for Euro Motorcars in
Bethesda, Maryland, highlights the situation succinctly, “Customers are busy. They don’t have the
patience or time to wait through a long, frustrating process to get their loaner.”
Unfortunately, with most current rental car systems, both outsourced and managed in-house, customers
typically wait 5 to 25 minutes to get into their car. That is not a scenario that will create a happy customer.
Beyond the time issue, there are other factors that can make the loaner car experience less than positive
for customers:
 The hand-off: Customers trust their dealership service advisors and rely on them to be a guide
through the entire service experience. But when the customer needs a loaner car, the trusted
service advisor oftentimes must hand the customer off to an unknown third party who runs the
loaner desk. Customers may then be herded onto a third party rental car company shuttle and have
to travel to that facility to get their loaner. That is frustrating and wastes more time from the
customer’s perspective. Not only do customers have to wait at the counter for a loaner, they forced
to work with someone that they have no relationship with and who they’re not sure they can trust.
 The supply and demand problem: If the dealership has an in-house loaner program and they are
out of vehicles, the customer hits another roadblock and frustration builds when they have to wait
long periods for a loaner car or cannot even get one at all.
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 The vehicle quality problem: The customer expected to get a loaner vehicle comparable to the
one brought to the dealership for service. When they get a car that does not meet that expectation,
their dissatisfaction grows. This is typical of an outsourced, third party loaner car program.
 The trust issue: When the dealer or rental agent loans a vehicle to a customer, the process of the
walk-around is demeaning from the customer perspective. Customers feel that, since this is the
dealer or third party agency’s car, the dealer should be accountable for any damage, not the
customer.
With this process in place, dealers are not delivering a superior customer experience, which can have
serious repercussions in terms of customer loyalty, CSI, and the likelihood that the customer will chose
the dealership for service or even sales in the future, not to mention the impact on the dealership’s status/
ranking with their OEM.
The Dealership Challenge:
How Can a Loaner Program Deliver Greater Profitability and
Control?
To maintain more control over the customer experience, dealerships often build in-house loaner car
operations, but even these internal resources can raise challenging questions:
 How big should my fleet be?
“With the right tools
 How do I effectively recover fuel costs and other policy violations like vehicle damage,
and processes in
place, the workload
is virtually the
same”
citations and late day costs?
 How can we ensure that we are using our loaner fleet responsibly and effectively?
One of the biggest concerns that dealerships have is that managing a loaner vehicle program is
something that is outside the core competencies of their enterprise and their staff. They need a process
for competently managing the loaner operation without adding stress and workload to their current staff or
needing to increase staff. When they consider bringing the operation in-house, they face the added issue
of making sure that in the on-boarding process is seamless for the customer.
Euro Motorcars’ Jim Willard has managed through the process of transitioning from a third party system to
bringing loaner vehicle operations in-house and notes, “In the beginning, everyone is worried about the
workload and about losing the “buffer” of the rental company. The reality is that, with the right tools and
processes in place, the workload is virtually the same. If you handle the customer properly, there is no
need for a buffer.”
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Converting the Loaner Car Problem into a Center of Excellence for
Your Dealership
Focused on the challenges and concerns about in-house loaner car operations, many dealerships fail to
recognize the positive potential of an effectively run operation. “There is a real opportunity to save money
and improve CSI by focusing on loaner car operations,” explains Charlie Waters, Division Manager, M5
Management Service Group, a consulting firm that specializes in advancing fixed operations for auto
dealerships nationally and internationally.
To realize that potential, however, dealerships need to tackle the customer and dealer challenges that
could stand in the way of success. There are several steps that are key to overcoming those challenges.
First, let’s look at strategies for solving the customer challenges:
 Do away with the loaner counter. Eliminate any bottlenecks in the process that cause customers
to wait or be transferred to a third party that may not share the dealership’s commitment to a higher
level of customer service.
 Build on the customer’s positive relationship with the service advisor. Make getting a loaner
car a seamless part of the interaction with the service advisor. Customers already value their
relationships with their service advisors, so rolling the loaner vehicle process into that interaction
can extend the goodwill they feel toward their service advisor to the loaner experience.
 Do away with vehicle walk-arounds. Not only does this save time from the customer’s
perspective, it also demonstrates that the dealership is accountable for the state of its fleet and
trusts its customers.
A positive customer experience is the foundation needed to increase customer loyalty. When customers
walk away from the dealership having had an easy, quick, positive experience with a dealer’s loaner
vehicle program, it solidifies their relationship with that dealership. Loyalty develops as the relationship
with their service advisor grows even stronger now that the advisor is their point of contact for the whole
repair and service experience. That’s an important factor, according to Jim Willard. “Customers deal with
their service advisor, not some rep from a rental car company that may or may not share your dealership’s
vision of customer service,” he says.
Solving the dealership challenges centers around getting streamlined workflows in place and empowering
employees so that they become stakeholders who are motivated to take an active role in ensuring the
success of the loaner operation and the overall dealership:
 Tie loaner fleet analytics to overall service department operational goals, specifically
profitability and average billable days.
 Implement user-friendly automation so that employees make fewer mistakes during the loaner
on-boarding and off-boarding processes. Automation also can lower costs and get the system up
and operational more quickly because less employee training on the loaner vehicle process is
required. The software and/or apps handle the details for employees. The solution should operate
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in all environments, meeting the needs of the smallest dealer in the suburbs all the way to the
highest volume, most complex dealer operations in major cities.
 Empower employees by making the loaner operation a process that anyone in the organization
can take part in. When you have unlimited users of the automated process, all stakeholders in the
dealership can play a role and have a positive impact on the success of the loaner program.
 Make sure all communications with customers are consistent by developing scripts for service
advisors and porters so they deliver a consistent, positive, customer-focused message that ensures
a pleasant customer experience from door to door.
 Align any new processes for the loaner operation to the apps and software used to manage
the process. That should include processes that focus on how vehicles are staged, how keys are
“The process of
fleet
management is
simplified”
tagged and distributed to service advisors, when vehicles are fueled and cleaned, how returned
vehicles are checked in and any damage is recorded, and how fuel, cleaning and other operational
costs are recovered. When all of these processes and the resulting information are managed
through the app and software, the process of fleet management is simplified and seamless and the
customer experience is streamlined.
 Involve the dealership’s pre-owned department in the choosing and ordering of loaner
vehicles to increase the operation’s profitability. These employees have insights into which cars
have the most potential for sale on the pre-owned lot. With their input upfront, after 6-12 months in
the loaner operation, the dealership will have a fleet of desirable pre-owned cars that it can sell.
 Tie the operation’s performance to pay plans and other incentives to the success of the loaner
vehicle operation to increase stakeholder buy-in and follow through.
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Conclusion
Loaner vehicle operations have significant, untapped potential to become a profitable center of excellence
within dealerships. This can be accomplished without hiring the skills needed to run the operation by
implementing an easy-to-use software solution and app.
There are a range of benefits to be reaped by dealerships that bring loaner vehicle operations in-house
and dedicate the focus needed to transform the operation into a center of excellence. With the right
software and applications, in-house loaner operations can save the dealership money. “Operating a loaner
program as a center of excellence reduces the dealer’s daily rental costs and increases control over
expense recovery,” explains M5 Management Service Group’s Waters. Cost-savings come from a variety
of sources, including better managing the cost of the vehicles in the loaner fleet and the costs associated
with fuel, damage and late days. Consider the statistics in the chart below:
According to Jim Willard, Euro Motorcars implemented a software/ app-based solution and realized
significant savings. From a total cost perspective, the dealership’s average vehicle daily rate dropped from
$47 to $18 per day and the dealership group saved 61% on its loaner program. With real-time predictive
fleet analytics, the dealer group optimized its loaner fleet, reducing its overall fleet size by 10%. They also
were able to manage, control and capture over 90% of their fuel costs and other loaner trip expenses,
which, if left unmonitored and uncontained, could have wiped out significant savings. Lastly, no additional
hires were made in any of the stores and existing staff, with minimal training, easily shared responsibilities
in operating the loaner vehicle program.
In addition to saving money, a seamless loaner vehicle operation that delivers a positive customer
experience at each interaction can have a significant, positive effect on CSI. Willard has seen this in
action at his own dealership. After the software/ app-based solution was in place for a year, the dealership
received strong praise from their customers about their loaner car experiences.
“Customers are clearly happier and they tell us on CSI surveys as well as unsolicited comments, letters
and emails,” he notes. “We’ve seen customer satisfaction improvements for our dealership rise from the
th
65 percentile to the 95th as reported by J.D.Power. One customer noted, “Best rental experience I’ve
had in 10 years.”
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About the author
Tom Klaff is the Founder and CEO of Concourse Express, a company that has
invented the new paradigm for in-house loaner vehicle management in collaboration
with a prominent dealership group in the Mid-Atlantic. Leveraging decades of fixed
operations experience and workflow design, Concourse Express is the only webbased, dealership-integrated courtesy car solution, designed with dealers for
dealers, that delivers a superior customer experience and increases dealership profitability with easy-touse tools that empower dealers to better manage and control their courtesy vehicle operations.
© DealerFlow, LLC 2014
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© DealerFlow, LLC 2014
1.888.529.7556
[email protected]
concourseexpress.com
concourseexpress.com
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