Typically, by the end of the sales experience, when a representative at the dealership asks a customer if they would like to purchase an extended warranty, it is safe to assume the answer will be “no.” They have just committed to a purchase that will impact them for years to come, and the thought of shelling out more money might be too much to consider at that point. However, a survey conducted by Protective Asset Protection, a provider of F&I programs, reveals that customers might be a bit more open to vehicle service contracts than initially thought. Read on for takeaways from the survey as well as some positive outcomes for dealers and their customers.
Many Customers are Enjoying Savings
According to the study, four out of ten car buyers who bought extended purchasing agreements saved an average of $1,000 to $2,000 in repairs and parts replacements. Many have wondered if service contracts financially make sense, and according to the study, they can. Dealers should definitely make use of this information and explain to customers how much they are likely to save after their initial warranty runs out if they invest in an extended warranty.
New Innovations Bring the Need for Repairs
There is so much out of a driver’s control these days, and a vehicle service contract can add an extra layer of security for customers. The survey indicated that the top three areas most likely covered under a service contract were steering (47.2 percent), technology feature service (44.4 percent), and brakes (44.4 percent). The second area, technology feature service, should definitely raise the eyebrows of dealers everywhere. With all the new technology add-ons included in cars today, it would make sense to talk through extended coverage options during the explanation of these features. Many customers are still a bit on edge about the increasing technology used in cars, and a vehicle service contract may ease the worries regarding repairs.
A Margins Boost
It is no secret that profits from auto sales are falling. This fact has rightfully become a cause for concern for many dealers. As a result, many have had to come up with ways to make up the difference. According to the Protective Asset Protection survey, 78.8 percent of dealers surveyed said their current F&I products are not enough to offer margins. A boost in vehicle service contracts can help ease the margin worries of dealers. Options to lift profits are scarce, so an extended warranty can help fill that gap.
Dealers are Looking for More Control
The survey also conveyed an interesting note about what dealers are experiencing regarding selling F&I products. A percentage of 57.6 wanted more control in branding their F&I products, and 54.5 percent felt staff needed more training to sell these items. Finally, two of the main barriers to selling F&I products like extended warranties were price and customers not seeing the value. Dealers are definitely looking to take the wheel when it comes to marketing and explaining the importance of this option. Those who are on the frontlines and interact with customers on a daily basis have the insight to create pitches that speak to the concerns and desires of customers. It would make sense that dealers invest in training and strategies to better market service contracts to the local clientele they serve.
Final Thoughts
This survey reveals that customers will purchase extended vehicle service contracts if they can easily see the benefit and value of doing so. It might make sense for dealers to begin collecting data on the number of repairs needed on particular vehicle types over a year to help customers decide what the future may hold. Discussing the amount of savings, the potential hiccups new technologies can bring, and the coverage options for extended warranties can give customers all the information they need to make a decision that points toward a purchase.
