It's a fact of life in auto dealerships that most customers are skittish when it comes to purchasing a service agreement or extended service contracts when they buy their new or previously owned vehicle. You have heard it all: extended service contracts aren't worth the extra money because your brand never breaks down, or the buyer simply can't add any more money on the purchase.
At the same time, however, consumers are also skittish about the economic recovery, fearing that something will derail it and place them in an economic bind. By capitalizing on buyer sentiments to protect the value of their purchase, your dealership can successfully market service agreements
Dealer service agreements have long suffered from a bad image because they were rarely used, accounting for a large portion of consumer resistance. Consumers traded in their vehicles more frequently. A report by IHS Automotive in 2015 indicated that the average age of vehicles in the United States is 11.5 years. In addition, the average length of ownership of new vehicles was 6.5 years, while the number of cars more than 12 years old is expected to increase by 15% by 2020.
Ask your buyers how long they plan to keep their vehicle. Point out that many repairs are not a simple fix as they were in the past because of more complicated technology. Broken down components are usually replaced not repaired, adding to cost. Savvy F&I managers will also ask buyers if they would ever purchase a vehicle without an extended service contract. When they respond with no, the next question to ask is when the likelihood of breakdowns is more apt to occur. Of course it's after the service contract period ends, resulting in sometimes hefty repair bills.
Involve your customers in the decision by asking them pertinent questions about how much they think they could afford and how they would finance large repairs. When spread out over the life of a typical car loan, the price of a typical service contract is low when compared to potential repair bills in the future. Most of all, listen to your customers and don't talk at them, give them time to decide after you present your information and make sure you answer all questions.
Contact us at Vanguard Dealer Services for additional information on how you can run a more effective new car dealership.
