Equity mining software enables dealerships to identify past store customers who are in a position to replace their current vehicle with a newer model for about the same monthly payment by looking at several data points in the dealer’s database such as estimated equity in a car, new factory incentives, residual values, interest rates, etc.
In a recent story on Automotive News Brian Benstock, General Manager of Paragon Honda in Woodside NY, estimated that of the 500 new vehicles the store sells per month, equity mining is responsible for 200 or 2,400 sales per year.
A recent Automotive News survey indicated that 59% of dealers use equity mining software with 47% of those say their results are good to very good.
This could mean that a fair number of dealers have not taken the plunge to pursue this strategy.
Benstock uses two different vendors to support his strategy. Given my experience in my business, I think that is a good idea.
When searching for 401(k) plans, I use two commercial databases and one government database because they tend to find different plans, or if they find the same 401(k) plan, they might offer different or additional information which is helpful to me.
While I am not a computer programmer, I suspect that each program has different algorithms that search out different criteria. By using two different vendors, Benstock is likely finding all the potential customers in his store’s database that meet his criteria.
Besides selling more new cars, there are other potential advantages to your dealership:
- Minimal marketing cost to sell a new vehicle. A current customer identified by the software can be called, emailed, or approached when they bring their car into your dealership for service.
- You might save a few dollars buying from an existing customer rather than auction, especially given the cost to transport auction vehicles back to your store.
- Lease initiation fees or a dealer reserve payoff for arranging financing.
- An opportunity to sell your full suite of F&I products.
- Finally, there might be a likelihood that you have a new productive source of good quality vehicles that can be sold CPO.
For those not currently utilizing an equity mining strategy, some of the largest providers include Reynolds & Reynolds, AutoAlert, CDK Global, and Dominion Dealer Solutions.