We discovered a significant decline in returning customer transactions in 2024 and believe the car business is now facing a consumer loyalty crisis of unprecedented scale.
What does Loyalty Cost?
A loyal customer costs 7 times less than a new customer.
According to NADA, new customer acquisition costs are $633. Getting a return customer from a past sale or service costs less than $100 in comparison. It is the lifetime value of a loyal customer that makes the high costs of acquiring new customers worthwhile. This all assumes your dealership has a process for customer retention.
Loyalty Crisis
Loyalty rates dropped 12% for dealership sales departments in 2024. Customers who have received service at the dealership or purchased a vehicle there are not returning to make additional purchases at the same dealership.
In simpler terms, one-third (~33%) of a dealership’s monthly sales should come from customers who have spent a dollar with them before, but now it is one-fifth (~20%).
Why has this happened?
The loyalty crisis began with the COVID-19 pandemic, which triggered unprecedented inventory shortages that fundamentally altered the car-buying experience. Limited vehicle availability forced many loyal customers to:
- Endure extended waiting periods for preferred models, during which they explored competing brands
- Accept substantially higher prices due to supply-demand imbalances
- Experience a “take it or leave it” attitude from dealerships operating in a seller’s market
"When you live on commissions, it is harder to view the world outside of the calendar month. When the month is over you flip the channel to the new month and the past quickly fades in the distance. Customers don't live this way. Their memories are long and so are their grudges. The ones who were used to buying cars in a pre-COVID world have been in for a shock, in the 2020s and they are reciprocating in kind. Dealers need to show them something new - something different - something that gives them a clear path ahead freely."
Ongoing Affordability Issues
Affordability is not just about the price of cars – Service plays a big role too!
The Average Service Cost is now $521
Sales
Vehicle affordability has emerged as a critical loyalty barrier. The average new vehicle sales price reached $48,405 in 2024, compared to just $33,560 in 2015—a dramatic 44% increase in just ten years.
During inventory shortages, many dealerships implemented significant markups that damaged customer trust. Research indicates that 80% of buyers paid MSRP or more for a new car during the peak shortage period, with 34% reporting unexpected fees.
- 30% of customers who paid over sticker price indicated they would actively discourage others from visiting the dealership
- 32% of buyers stated they wouldn’t return to the dealership for service needs
- Many consumers reported permanently switching brands after negative pricing experiences
Service
In 2019, the average service visit would cost a customer $283, and that has increased by 84% to $521.
Vehicles with more than 100,000 miles on the odometer have an average repair cost of $692.
Summary: In terms of vehicle buying cycles, 5 years is not a long time. Vehicle prices have drastically changed, and so has the cost of maintaining them. The average new car payment is over $700 per month. Pair that with the increase in car insurance costs and gas, and a monthly car budget can be closer to $1,000. When service is needed, that monthly budget can break $1,500. This can be hard for many people to handle.
Giving to Get
If you are a concierge,a guide,not trying to sell you'll earn their business next time.
The ownership experience can differ significantly from the car-buying experience. It isn’t enough to inform customers that a service is due or that their car is under recall. Owners want an advisor beyond the car-buying process. They want help from a professional to advise them on what they should be doing for their car and themselves, because most are not car enthusiasts.
How to Move ahead
VehicleLyfe makes it easier. It proactively answers the questions customers have about what to do next with their vehicle. It automates the giving side of what customers want from their dealers.
Nothing can bring car prices back to what they were before the pandemic, but VehicleLyfe’s connection to illumiquote shows customers the best payments on every car they can buy, including their equity. This helps to make your inventory look much more affordable. It is also a great way to drive engaged leads for your team.
Service is always available to every customer, regardless of whether they have just bought a car or have owned one for decades. VehicleLyfe shows them their past services with your store and helps to reinforce what they may have declined last time. Since it’s all digital, customers are encouraged to use your online service scheduler.
Keeping customers informed about their warranty coverage promotes opportunities to extend coverage or add additional F&I products after the sale.
All of these services keep the customer knowledgeable about their car, and that is something nobody else is doing for them.
