Last week, we discussed three major profit pockets in the industry. Today, we will be expanding on add-ons and how to protect your pocketbook against featuritis.
With car-buyers being more informed on price and preferring a no-haggle price point, there is a lot of pressure on the Finance & Insurance Department to create profit outside of traditional car pricing.
This has shifted focus from putting high margins on the car’s price to encouraging car-buyers to purchase more and more add-on products that have extremely high margins. In fact, based on a public filing from AutoNation, dealerships make 5.6x more profit on add-on products than the actual car itself.
One thing dealerships rely on is featuritis. Featuritis is a trap in which dealerships propose more and more optional add-on products, which suddenly feel like necessities the longer the car-buying process goes on.
The five most common car buying add-ons are:
1. Rust proofing
2. Fabric protection
3. Paint protection
4. Vin etching
5. Extended warranties
Do these sound familiar to you? Probably not, but it’s likely you purchased them last time you bought a car. Based on data from the National Association of Automobile Dealers, 77% of customers buy some aftermarket products from dealers.
In order to avoid featuritis and spending potentially thousands more than you intended, ensure that you do your research. Know what each add-on entails and if you want them before entering a high-pressure sales situation. Also, when going through the car-buying process, don’t feel pressured into saying yes and resist the featuritis!