Industry News & Trends

Shoppers Cite Dealer-Related Issues Among Top Reasons for Rejecting a New Vehicle – J.D. Power and Associates Reports

WESTLAKE VILLAGE, Calif., Sept. 24, 2008 – A majority of vehicles are rejected only after a new-vehicle shopper has visited a dealership, according to the J.D. Power and Associates 2008 Escaped Shopper Study(SM) released today.

The study, which analyzes the reasons why consumers consider a model but ultimately purchase a different make or model, finds that 80 percent of vehicles are rejected after a new-vehicle shopper has visited a dealership. Three dealer-related issues are among the top reasons for not purchasing a vehicle: another dealer has better service; limited availability of the specific vehicle shoppers are looking for on dealer lots; and lack of professionalism among personnel at the dealership.

“Given today’s challenging automotive market, both sales and service experiences at the dealership are particularly critical in the decision-making process of shoppers,” said Tom Gauer, senior director of automotive retail research at J.D. Power and Associates. “Sales personnel can play a key role in improving close rates by viewing customer visits as an opportunity to demonstrate a vehicle’s value and by successfully matching shoppers with the new vehicle that best suits their needs.”

The study also finds that an increasing number of shoppers have considered buying an Asian brand — 63 percent in 2008, up from 60 percent in 2007. Conversely, the proportion of shoppers who considered buying a domestic brand has decreased — down to 55 percent in 2008 from 58 percent in 2007. Shoppers who cross-shop among Asian and domestic brands are more likely to purchase an Asian brand and most often cite retained value, reliability and gas mileage as primary reasons for their choice. In contrast, those customers who purchase a domestic brand instead of an Asian brand most commonly cite a desire to “buy American” as their primary reason for purchase, followed by rebates and incentives offered, and vehicle price.

“As shoppers move away from larger-vehicle segments in growing numbers, domestic manufacturers — more so than Asian and European manufacturers — must focus on rapidly aligning their U.S. product portfolios with this shift in consumer preferences,” said Gauer.

The percentage of shoppers who cite gas mileage as a reason for rejecting a vehicle has increased in 2008-up to nearly 20 percent this year from nearly 17 percent in 2007. Unsatisfactory gas mileage is the third-most-common reason to reject a vehicle, with particularly high rates of rejection in the large, midsize and compact utility vehicle segments.

Nearly 40 percent of all new-vehicle shoppers cite price as the most influential reason for not purchasing a vehicle. Additionally, nearly one-half of shoppers 40 years of age and younger reject vehicles based on price- or finance-related issues. In contrast, only one in three shoppers who are 60 years of age or older reject vehicles for the same reasons.

“Interestingly, nearly 40 percent of all shoppers who reject a vehicle because of price say they can afford the vehicle, but don’t believe the vehicle is worth the price,” said Gauer. “This presents an opportunity for dealership personnel to focus on demonstrating the different features contributing to the vehicle’s total value to these shoppers, which can eventually lead to increases in close rates.”

The 2008 Escaped Shopper Study is based on responses from 29,903 new-vehicle buyers surveyed between May and July 2008.

Founder of DealerRefresh - 20+ Years of dealership Sales, Management, Training, Marketing and Leadership.
I don't know what to say other than...."Duh!"
I agree with Tom. In addition to that, with credit tightening up in this market, and with so many of our buyers with special finance needs, I am preparing my team to "weather the upcoming storm" with this slowing market... Many of our buyers who want to buy cars are not going to be able to get the loans to get them, or certainly not as easy as before...
I would have to agree and disagree with Tom and Kevin on the issue of forty % finance related purchase issues. According to the article, it seems that the buyers could afford the vehicle. This leads me to believe that there may be a "disconnect" when the customer is approached by the Finance Manager becauase they can probably finance or lease as well. Personally, I have noticed that when the Finnce Manager approaches the customer after numbers have been agreed upon the customer seems to "clam up" because they see that person as the one who takes their money. I have started to ask leading finance/lease questions during the demo. to allow the Finance Manager a smoother transition from the close of the deal to the intro. of finance/lease options. Upon agreeing to figures with the customer I am sure to inform. the Finance Manager of any information that may help him/her with making some type of connection and build a rapport. You, as a Salesperson has spent up to an hour building rapport and sharing stories. Having been on BOTH sides of sales and finance, I took a few minutes to talk with the Salesperson in private to gather info. thus giving an impression to the customer of someone there to help them make an educated decision with the next step in the purchase/lease process. If 40% reject a vehicle but have the means to buy then one could only assume that they also have the means (credit score, money, DESIRE) to purchase or lease. Keep in mind that Finance Managers have a VERY difficult job. They go in after the close - the point at which the customer has, in their mind, already made the purchase. When they (the customer) is "hit" with dizzing rates, residuals, money factors, etc., the situation coould quickly become adversarial. My suggestion: 1) HELP your Finance Manager by asking the proper questions (target payment?, ever considered a lease? how many miles do you drive per yr.? have you had any siginificant warranty repair costs with your current vehicle?) These questions build validity for the Finance Manager when he/she asks them later because they have had time to think on them. 2) PREPARE the Finance Manager by pointing out who the "decision maker" is and what common bonds they may be able to establish in a short amount of time. 3) ALLOW the Finance Manager adequate time to make a full presentation on all of the products he/she has to offer. If a customer says "I'm in a hurry", the let them know that so they can make a more concise decision on what to present and when. Depending on your pay plan, your Finance Manager can be a huge asset to every deal. If you think about it, we can do so much better than just "weather the storm". If we have clear communication and determenation to help each other we will be the storm! Remember, if you have proper control and can slow down the customer then everyone can at least have an opportunity to make money. All we need is an OPPORTUNITY!!!
Brock -
Great Comment! Asking those necessary questions during the time you are presenting your product will absolutely help the transition be so much easier when they walk in to the Finance Managers office.

Finance Managers also need to make a living and to sell their product just as the Internet Manager / Sales Staff needs to make their money by selling their product.

I have seen customers throw their hands up and walk right out of the finance managers office. They were not prepared, no questions were asked, they were hit between the eyes. Reason? The necessary steps were not taken by the sales rep.

Why throw your customers in the office with a guy / girl that they don't even know? It is scary for them. Reassure them and during the presentation of your product, introduce your customers to the finance manager if he is walking across the show room along with the intro to the GM, GSM. SM and much more. Even the other Sales Staff!

I have done that many of times and you will be surprised of the results!

Just my 2 sense!