Why people don't trust car dealers... and how to fix it

Welcome to another edition of expert insights from the Car Dealership Guy Podcast, an episode recap that breaks down the high-level takeaways from the conversation.

In this episode, Kris Gaerlan, President of Dallas Lease Returns, and Sanjiv Yajnik, President of Financial Services at Capital One, sit down to discuss how dealers create an unbeatable customer experience, both online and offline.

You can stream the full episode now on YouTube, Spotify, or Apple.

1. Why dealers remain important.

While there’s been immense investment into transitioning the auto retail business online, the in-store transaction remains as important as ever. Sanjiv explains that this is because the dealership is an “anchor tenant” of the car industry, providing automakers with a connection to the local market that digital retailers can’t provide. For the car business to be healthy, dealerships must also be healthy.

2. Standing out.

Transparency is no longer unique in the car industry. Kris notes that when he first started Dallas Lease Returns, it was rare for online dealers to provide pictures of vehicles or even offer quotes over the phone, whereas today, both have become a requirement for providing a good customer experience. This means that being transparent is no longer enough to stand out from the crowd. Providing an unmatched in-store experience is now a dealer’s best bet for winning customers over the competition. “I think people want [in-person] experiences again,” he explains.

3. Practical tactics.

One way Kris has improved the in-store experience at his Texas showroom is to store all of his vehicles inside. This is critical for shoppers in his state due to the heat, which can make test drives or walking around the lot miserable for most of the year. He also leaves vehicles unlocked, allowing customers to examine the inside of a vehicle without having to sign paperwork.

4. Transparency.

While in-store experiences are more critical than ever, transparency remains key. Sanjiv explains that according to a recent Capital One consumer survey, most car shoppers would be willing to pay more at a dealer they trust than purchase from a dishonest seller. What’s more, adding a soft credit check or pre-qualification to your shopping experience boosts perceptions of transparency by as much as 50%.

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Capital One - Nearly half of car buyers are willing to pay more for a car if they think it is a dealership they could trust. This is just one key takeaway from the 2024 Capital One Car Buying Outlook. Check out the full 2024 Capital One Car Buying Outlook here: capitalone.com.

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5. Online experience.

A dealer’s online shopping experience can enhance the in-store experience. Since most customers start their car search online, retailers have an opportunity to alleviate some of the anxieties associated with car buying before they even step into the showroom. Kris achieves this by offering Capital One’s widget on his website, which allows Internet users to obtain pre-approval for an interest rate directly from Capital One rather than his own business. This reduces the amount of guesswork a customer has to do in-store while also making the entire experience feel more transparent since the rate is coming from an impartial third party and isn’t being marked up by the dealer. On the other hand, dealers can ruin their in-store experience by implementing poor digital practices. Sanjiv notes that many retailers lose long-term buyers by forcing them to re-enter information they already submitted online. Making the transition from Internet to in-store shopping smooth for customers is critical to success.

6. Empowering your sales team.

Empowering workers can make a massive impact on the customer experience. Inspired by the service philosophy at a local restaurant, Kris implemented a policy at his dealership: sales staff members would be allowed to do whatever was necessary to ensure customers were happy after their purchase within 90 days, no questions asked. This means that if a buyer’s tires were worn out, the salesperson could offer replacements free of charge. While this might seem like a bold strategy, Kris notes that not only has his storefront won multiple awards, but he has also seen a sharp improvement in customer retention/referral, which now stands at 40%. Since it’s $400 cheaper for him to serve a repeat customer than it is to work with someone new, his strategy has saved his business huge sums of money.

7. Profit and service.

Kris clarifies that his sales representatives do have skin in the game when it comes to keeping their clients happy: whatever they offer to the customer for free comes out of the gross profit for that transaction. While the dealership pays the majority, this can still impact the employee’s compensation. This helps ensure there remains a balance between serving guests and staying profitable. He also adds that while one of his business’ core tenants is to keep customers happy, another is to be profitable, further strengthening the idea of maintaining an equilibrium between service and money.

8. Connect with customers.

Kris recently implemented Capital One’s Muse into his dealership, and a metal card and/or QR code is given to sales staff that automatically puts contact info onto a customer’s phone. Employees are highly incentivized to use this system. When a customer checks out a dealer’s website using their Muse info, Capital One is able to track the lead and the salesperson who first connected with the customer. This means that when shoppers submit a lead online, the lead is attributed to the original staff member. This allows employees to earn more business, retain leads, and build stronger relationships with customers. The ability to implement Muse online is also of great use to team members with a social media presence. Kris notes that one of his staff members, who runs a successful TikTok account, was able to get his information onto 14,000 phones using the QR code in a single video.

9. Technology and transparency.

Sanjiv believes that the dealership sector will continue to become more technologically advanced by implementing generative artificial intelligence products that serve both buyers and dealers. He adds that he has become frustrated with how many vendors are leveraging AI but haven’t created tools with any actual benefit for dealers. Only real solutions that leverage machine learning to its fullest will find success in the industry. Sanjiv also urges all sides of the industry, from car makers to dealers, to collaborate so that the in-store experience can be enhanced more effectively and transparently.

10. AI and dishonesty.

Kris hopes that more tools will arrive that help great teams rather than replace great teams. He notes that when he demos many products today, the vendor often implies that their new tool will do everything that his team can’t or won’t do, making employees a redundancy rather than an asset. Instead, he believes that teamwork and a human connection are essential for productivity and success and that vendors would be better off marketing their tools as a way to enhance a team’s effectiveness than as a way to cut labor costs. He also hopes that more people will leave dealerships that use dishonest tactics. ‘The irony of the situation is that customers all hate that process, but it only exists because customers allow it to exist. Dealers aren’t going to charge you $1,500 that they didn’t tell you about in the listing unless you’re willing to pay it. But because you’re willing to pay it, they keep doing it. So, the power is in the people. They just have to be willing to stand up and leave.”

You can stream the full episode now on YouTube, Spotify, or Apple.

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