Dealerships study alternatives to loaners

Loaner programs for service customers are a sore point for many dealerships.

They're complicated to run. Automakers want the loaners to represent the brand. No Porsche owner should be put in a Kia Soul while his Panamera is being serviced, thank you very much. So for luxury brands especially, maintaining a large loaner fleet can tie up hundreds of thousands of dollars.

And some customers abuse the system. They might turn in their vehicle on Thursday for service in Boston, say, and drive the loaner the roughly 600-mile round trip for a long weekend in Bar Harbor, Maine.

But there are alternatives to loaner fleets. In some markets, for example, Uber for Business contracts with dealerships, which request rides for their customers.

Other options include DropCar, an app-based valet parking and driving company; and RedCap Technologies, a vehicle delivery software provider.

Some dealerships in the Manhattan area rely on DropCar's more than 250 drivers to transport vehicles needing service, instead of transporting owners.

DropCar began in New York City in 2015. At the time, drivers could be retained by individuals — for instance, to wait in the car while the client shopped or ate dinner — or as a monthly service that stored customers' vehicles when those vehicles weren't in use, a valuable service given the high cost of parking in the city.

Then the business caught the eye of the fixed operations director at Mercedes-Benz Manhattan, who approached the company to contract with his dealership.

For Mercedes-Benz Manhattan and a growing number of area dealerships, DropCar drivers fetch customers' vehicles and deliver them to the dealership's service department. Once the repair is completed, the drivers return the vehicles to the customers.

Demand for the service from dealerships has grown more quickly "than we initially anticipated," DropCar CEO Spencer Richardson told Automotive News: "These guys are coming to us."

DropCar's arrangement with dealerships provides stores access to the drivers, as well as DropCar's Enterprise Vehicle Assistance & Logistics technology platform. The platform essentially oversees pickup and delivery of vehicles for customers and dealerships, tracking car movement and repair status. Real-time maps, which dealership staff and customers can see, show vehicle location and driver information.

Sal Iacono, Bram Auto Group's vice president of fixed operations, said that since several of the North Bergen, N.J., group's dealerships switched to DropCar more than two years ago, the program has not reduced the stores' loaner total. But managing pickup and delivery of customer vehicles has become easier.

Using a driving service eliminates idle hands on dealership payrolls, while increasing the flexibility of moving vehicles on days when demand is heavy or light, the group's Lexus of Manhattan found. The dealership employed between four and six people to move vehicles, plus one or two managers to coordinate the drivers.

"If we had a team of people that were 100 percent efficient, we could probably make an argument that this is something that we can handle in-house," Iacono said. But that's not the case. "If demand increases significantly one day, and you have a fixed team, they can't handle that."

Toyota of Manhattan and Lexus of Queens, the other two Bram dealerships contracted with DropCar, were unable to offer customer vehicle pickup and delivery until they teamed with the company.

For Iacono, even if the net cost per vehicle transfer is higher with DropCar than before, the agility of outsourcing to a larger company to meet customer demand is worth it.

"It's not about saving money," he said. "It's more about the ease of managing the system, and the ability to satisfy customer demand."

When FlexRentals, an affiliate of Warren Henry Auto Group, of Miami, started using the RedCap Technologies software to coordinate delivery of luxury loaner cars to customers whose vehicles needed service, the goal was simple: Reduce the amount of time customers use the loaners.

By trimming the time that each vehicle was tied up, the new setup also meant there would be more cars effectively available for loaners, said Diana Rodriguez, business operations manager for FlexMotors, an umbrella company that includes FlexRentals.

A driver delivers a loaner to a customer and takes the customer's vehicle back to the dealership for repairs. When work is completed, the driver returns the vehicle to the owner and takes the loaner back to the dealership.

But the dealership group also gained an unexpected benefit: About 80 percent of customers who use the service agree to additional customer-pay service work on their vehicles. In fact, the average increase in repair-ticket revenue was 40 percent, compared with customers who didn't use RedCap, Rodriguez told Automotive News. While it's difficult to pinpoint the effect on the company's bottom line, she said it's substantial.

"It's a significant amount if you consider that it's 40 percent more revenue on 80 percent of the RedCapped vehicles," she said. About 20 percent of customers use the service. "We didn't expect this.

"But it reflects the psychology of the matter," she said. "When a customer isn't in front of a service adviser and not under pressure — and it's convenient because they never have to leave their office or home to get a loaner — they're more inclined to have more services performed on their cars."

Warren Henry sells Jaguar, Infiniti, Audi, Land Rover and Lamborghini vehicles from five dealerships, mostly around Miami. The RedCap platform is used at all the Miami-area dealerships except the Lamborghini store. In 2017, the group sold 4,851 new and 1,905 used vehicles, Rodriguez said.

The company used to rent luxury cars from car-rental companies. But now FlexMotors buys the luxury cars from Warren Henry and charges back the cost of the valet service.

RedCap does not provide drivers; it relies on an independent network of companies that vet and train drivers, said RedCap CEO David Zwick.

"We've also noticed a 'halo effect' on repair orders for dealerships that use RedCap," Zwick said. "We've found that repair orders are 18 to 30 percent higher," across all dealerships using the service, he said, "which we attribute to customers who say yes because time no longer is an issue for them."

To illustrate the loaner turnaround problem, Rodriguez cited a customer who needs two days of vehicle service. The customer drops off the car on a Wednesday, but when notified it's ready for pickup on Friday morning, the customer tells the dealership he or she can't come in until the following Monday. "So we'd have to pay for two more days for a loaner," Rodriguez said. "Plus we'd be waiting for loaners that other customers needed."

Rodriguez estimated that FlexRentals pays RedCap an average of $45 per round trip and averages about 1,100 round trips per month. The per-trip cost is based on a formula that includes the time of day the service is required and the distance traveled. Among other things, RedCap's computer dashboard tool itemizes trip costs, which makes it easy for dealerships to understand the cost-effectiveness of each trip. It also allows customers to review the service and provide feedback, plus it monitors drivers' performance, which helps weed out bad drivers, Zwick said.

"RedCap does a pretty good job at providing clear data," Rodriguez said. "They don't want dealerships to feel like they're being taken for a ride, so to speak."

Using RedCap also yields another benefit: higher scores on dealership consumer-satisfaction surveys. Rodriguez said that is impressive because it's difficult to make getting car repairs a good customer experience. "It's probably three times harder to provide a better customer experience because it's not like the excitement of buying a new car," she said. "So what better way to make it a great customer experience than by removing a major pain point for customers — the time they feel they waste at a dealership?"