From time to time, new vehicle manufacturers have operated on the fringes of the rental market through their network of dealers. Their presence in the rental industry is “on the fringe” because the dealer rental operations haven’t gained much market share. In fact, most dealer rental operations don’t function very well at all.
In theory, dealer rental operations have many advantages that should make them powerful competitors to more traditional rental operators. What are those advantages, and why have they failed to deliver success to new car dealerships?
Advantages to a Dealer Rental Operation
Here are some of the theoretical advantages dealer rental operations have over the more traditional rental companies:
• Streamlined Operations Offer Better Customer Service
Rental operations are right where the demand for a replacement vehicle exists. There is no need to shuttle vehicles or customers to another location.
Dealership employees will be in charge of the experience from beginning to end. Existing staff, often an assistant service manager, can handle the rental process at the same time that they open the repair order for the customer’s car. There is no need to turn the dealership’s customer over to another service provider.
The charge for the rental vehicle can be billed to the customer through the repair order, and can be paid with a single payment from the customer. Of course, it’s very easy for the dealer to pass those billings through to the factory through a warranty claim. And payments to dealers are expedited—much more quickly than payments to other rental companies.
Dealers often have an established relationship with the customer through previous car sales, routine vehicle service and community events. In smaller towns, dealers are well-known from vehicle purchases, from routine maintenance of their vehicles and through the sponsorship of youth sports teams and local events. That type of name and face familiarity doesn’t develop for traditional rental operations, which might not see a customer for four or five years at a time.
• Rentals Used as a Sales Tool
The rental operation can be an effective sales tool, and vice-versa. The new and used car departments should generate demand for rentals, and the rental department should routinely generate sales for those departments, creating synergies that are unavailable to traditional rental companies.
• Lower Cost Structure
The dealer should be able to offer competitive pricing because he can use an existing facility to house the rental operation, with little or no added overhead expense. Most operating expenses, including rent, utilities, Internet access, telephones, security systems, copy machines, credit card machines, etc., are already available in support of dealer operations.