A dealership staffer tells of a customer who purchased a new car but declined to buy an extended-service contract for it. When the vehicle broke down a few years later, she sought to buy the repair coverage retroactively.
Alas, it doesn’t work that way, any more than a homeowner can buy fire insurance after the house burns down.
But dealers shouldn’t stop offering extended-service contracts to people who initially refused them, auto-retailing experts say. Plenty of opportunities are available after a customer leaves the finance and insurance office and drives off in a newly purchased vehicle.
The back shop is considered a good place for taking another crack at selling vehicle service contracts to first-refusers who later return to the dealership for car maintenance and repair work.
Under such circumstances, service advisors are in the best position to pitch contracted coverage, says Clay Nelson, consultant-business solutions for Ally Financial.
“The service adviser may be the most trusted person in the dealership, sees customers more often, knows their driving habits and knows the service-contract policy better than anyone else,” he says.
Typically, the F&I office is the first to offer service contracts at the point of the vehicle. But it benefits no one if it stops there.
“Why is the vehicle customer given only one opportunity?” Nelson says at an F&I Management and Technology conference presentation entitled, “Service Contract Sales in the Service Lane.”
The service department needs to do certain things to succeed at that, he says. “It takes commitment, process, tools and compensation.”
It also takes staff flexibility. If a service adviser gets tied up selling a contract during a busy time, “the service manager must be ready and able to jump in” to prevent customer backups, Nelson says.
Some dealership service departments assign specific staffers to pitch extended-coverage plans, says Rick Messigner, co-founder of Dealer Associates, a consulting and firm.
“Service advisers can get crazy-busy, limiting the time they can spend selling service contracts,” he says. “Having a dedicated salesperson addresses that problem. One young person sold 20 and made $8,000.”
At what point should a service adviser pitch a contract to a customer in for warranty work? “After taking care of the warranty claim,” Nelson says. “Satisfy that first need. Don’t jump in too early.”
Service advisers won’t enthusiastically sell contracts if they’re not paid to do so, he says, citing spiffs, flat fees and bonus volumes. “Compensation is the only way it is going to work.”
Paul Knox agrees. “For fixed operations to handle vehicle service contract sales requires strong leadership and a strong bonus plan,” says the business development manager for AUL, a firm offering coverage plans for used vehicles.
Gross profits from such sales should stay in the service department, Nelson says. “That is how you get the service manager’s attention.”
Service departments selling extended-service contracts can miff F&I managers who may see it as a turf intrusion. “But F&I must realize this is not a regular car deal,” Knox says at AUL’s annual agency meeting. “F&I and fixed operations must support each other.”
Selling repair and maintenance coverage in the service lanes requires determination, says Nelson, who warns against expecting immediate and dramatic results. “Avoid making it the program of the month.”
No two dealerships do it exactly the same way, Knox says. In some setups, service advisers sell the coverage and the F&I office does the paperwork.
But in virtually all cases, staff buy-in takes place if employees understand “how meeting goals will benefit them personally and how it will move the organization forward,” he says. “When a service adviser buys into the mission, he or she becomes a force.”
