When it comes to F&I, the factory warranty presentation often gets rushed or skipped entirely. However, on today’s episode of F&I Today, Paul Brown, VP of Ascent Dealer Services, explains why spending more time on this step can pay off big for dealerships, from boosting VSC penetration to pre-framing objections before customers even sit down for the menu.
“Factory warranties are one of the steps I see glossed over the most,” Brown said. “If we skip this step, we lose the opportunity to present key information to the customer in a non-threatening way.”
Brown highlights that F&I managers should thoroughly cover both comprehensive and powertrain (stated component) warranties. While the comprehensive warranty outlines what is not covered, making it easier for customers to understand their protection, the powertrain warranty lists only covered components. By starting with the most robust coverage and working backward, managers can clearly communicate what the warranty entails, what maintenance is required to keep it in force, and how it ties into prepaid maintenance programs.
A critical part of the conversation, Brown said, is ensuring customers understand the real cost of repairs. He explains that, “For every $1 spent on labor, you spend $2 on parts.” Therefore, in theory, if the labor rate is $150 an hour, that’s $300 in parts, for a total of $450 an hour to repair a vehicle. So, it’s imperative that dealers are transparent when conversing with their customers.
Brown references a recent J.D. Power report that analyzes current trends in vehicle repair costs and frequency, which indicates an average of 204 repairs per 100 vehicles. Typically, manufacturers allocate 2-3% of a vehicle’s MSRP to cover warranty costs. He also notes that as cars get older, repairs become more frequent and more expensive.
“What we see as cars get older, they break more frequently, and as they break more frequently, they break more expensively.”
The rising cost of vehicle electronics is a major factor in the increase in new car prices. Brown points out that electronics now account for nearly 50% of a vehicle’s total cost, up from 25% just 10 years ago. This trend has coincided with the average new-car price rising by $15,000 over the last decade.
To avoid misunderstandings, Brown stresses the importance of tailoring the warranty presentation to the customer’s driving habits and intended vehicle ownership period. For example, a customer who drives 15,000 miles annually doesn’t get the full three-year, 36,000-mile coverage, but they will reach the mileage limit sooner. By framing coverage in terms of real-world usage, managers can prevent misperceptions and set clear expectations.
Ultimately, the factory warranty presentation is about more than compliance; it’s a strategic tool to pre-frame objections, educate buyers, and lay the groundwork for service contract sales. Brown recommends that five key points be covered thoroughly during the presentation, and spending more time on this step than on any other part of the process.
