GM's Latest Loyalty Weapon: Loaners

Automaker Expands Courtesy Transportation Program

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GM is letting participating dealers decide which mix of vehicles is best. In Texas, pick-ups might predominate.
GM is letting participating dealers decide which mix of vehicles is best. In Texas, pick-ups might predominate.

Chevrolet dealer Duane Paddock runs a fleet of 50 vehicles that he loans to service customers and as demos -- up from exactly zero two years ago.

His dealership is part of a huge expansion of General Motors' Courtesy Transportation Program, a bid to create better loyalty via the service lane and by getting more people to try Chevy, Buick and GMC vehicles.

Last year, GM added elements to the program to entice dealers to sign up, including more cash tied to every loaner vehicle. They get the freedom to choose the vehicles -- Texas dealers can stock pickups while San Francisco stores can load up on Volts. And GM lets dealers still apply new-vehicle incentives when they're sold after they come out of the rental fleet.

Apparently, it's working. GM says dealers representing about 90% of Chevrolet and Buick-GMC sales volume now operate fleets of new courtesy cars. That's up from about 20% of the brands' volume two years ago. (Cadillac runs a separate loaner program.)

Steve Hill, GM's U.S. VP-sales and service, says the program is a perk for service customers and sells cars by providing test drives disguised as loaners.

"There's a compelling sales component," Mr. Hill says. Dealers get customers settled into the loaner by helping them pair the Bluetooth or preset the radio stations, for example. "For someone driving a 4- or 5-year-old car, psychologically, they feel like it's their car now," Mr. Hill says.

How it works
Here's how the program works. Dealers are given $500 for each vehicle they put into their courtesy transportation fleet, at which time GM records it as a new-vehicle sale. GM sets the number of vehicles that dealers can put into the fleet; dealers decide the mix of vehicles.

The cars and trucks stay in the rental fleet for either 90 days or 7,500 miles, whichever comes first. Dealers can provide the cars to service customers or loan them out for test drives of up to three days. Or they can rent them to customers who want to drive them longer.

When the vehicle comes out of the courtesy transportation fleet, the dealer is given two $250 "service value certificates," which the dealer can apply to any new-car sale. The vehicles that leave the fleet are sold as used but are eligible for any new-car incentives offered at the time.

Dealers are joining the program because of the flexibility to manage their own fleet rather having an in-store rental agency such as Enterprise, which sometimes puts customers into off-brand rentals, Hill says.

Mr. Paddock, owner of Paddock Chevrolet in Kenmore, N.Y., has hired a full-time manager to run his rental fleet. He plans to phase out his in-store Enterprise agency.

GM's program "allows you to increase the level of customer service while maintaining a margin on the rental side," Paddock says. "And you still have the ability to sell the vehicle later at a profit."

Not all dealers are signing up, though. Some smaller operations say they don't have the staff to manage a rental fleet and would rather stick with an outside agency.

Christopher Weiss, owner of Crest Auto World in North Conway, N.H., which sells Chevrolet, says his lone service writer wouldn't have the time to track the rental fleet.

"To add that level of documentation to his already crazy schedule," Mr. Weiss says, "would make things really difficult."

--Mike Colias is a reporter for Automotive News

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