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Sirius XM Radio (Nasdaq: SIRI ) is a used car salesman again.
The satellite radio provider is teaming up with Toyota (NYSE: TM ) to give a SiriusXM receiver with three months of free access to buyers of a Toyota certified used vehicle or a Scion certified pre-owned vehicle.
The allure of the trial subscription is simple: Nearly half of the people that try satellite radio during these free trials convert into paying customers. If it weren't for this push -- and a sales team financially motivated to promote the offer -- many buyers of secondhand cars may never get around to activating the dormant satellite receiver. These deals also help Sirius XM establish contact with used-car buyers so it can reach out to them even if they decide not to initially continue with the service.
This isn't a "eureka" moment for Sirius XM. Striking deals with showrooms on their certified pre-owned cars goes back at least three years.
Are used-car buyers as lucrative as new-car buyers? Probably not.
Despite the generally improving economy, Sirius XM's conversion rate on new vehicle sales has slipped from 46.4% to 44% over the past two years. The conversion rate is probably lower on used cars, as buyers turning to cheaper automobiles are less likely to justify the extra $15 a month for premium radio.
However, this is still an important place for Sirius XM to stand out.
Most used cars lack the latest technology that makes it easy for smartphone owners to broadcast content through their cars. Yes, Pandora (NYSE: P ) has deals with roughly two dozen carmakers to make it easier to stream the free ad-supported music service through a car's speakers, but that's technology found in the newer models.
This doesn't mean that Sirius XM is in a battle to suppress streaming technologies. Satellite radio has so many inherent advantages that it will continue to grow beyond today's 21.9 million subscribers. However, it's never a bad time to begin reaching out to drivers as they get behind the wheel of a car -- regardless of what the odometer reads.
Running of the bulls
I remain bullish on Sirius XM's future. It should come as no surprise that I'm promoting the CAPScall initiative for accountability by reiterating my bullish call on Sirius XM for Motley Fool CAPS.
XM Satellite Radio was a Rule Breakers recommendation before the Sirius XM merger. It's now gone from the scorecard, but if you want to discover the newsletter service's next Rule-Breaking multibagger, a free report reveals all.