Mileage-Only Service Contracts Debated

Some F&I people say a program based on time, rather than miles, is better. Others say the opposite.

Jim Leman, Correspondent

April 7, 2015

2 Min Read
New products provide more to talk about at dealership
New products provide more to talk about at dealership.

Will consumers opt for miles-only vehicle service contracts over traditional ones that include a time limit? Or are by-year limits better?

EFG Companies is hoping for a positive marketplace response to the first question. The firm recently launched MAP My Miles, a mileage-only VSC. EFG says 40% of surveyed consumers indicate their last service-contract purchase provided too little or too many miles for what they needed.

Half of the survey respondents also want to customize the miles of their next service contract to fit their own needs, EFG says.

That sentiment shows up in MTV’s study of Millennial’s attitudes about cars and car buying. Product customization is important to them. A miles-based service contract plays into this.

It creates a value-added conversation with customers in the dealership finance and insurance office, EFG says.

Other service contract providers aren’t so sure the model will work. But they’re getting creative too.

Ally’s new vehicle-service contract, Ally Premier Protection, will roll out nationwide this summer.

“While we do not have a mileage-only contract option, we do offer a wide range of time and mileage options designed to fit consumers’ individual needs,” says a company spokesperson. “We believe that contracts based on both time and mileage work better for consumers, particularly from a pricing perspective.”

Other F&I product providers agree.

“(A mileage-based service contract) is an intriguing concept,” says Alpha Warranty Services Chief Operating Officer Jeremy Lindsey. “But if as business managers we are doing a good job during the interview process to gather how many miles the customer drives per year, the result is a better-suited mileage term, anyway.

“Having said that, we know that best practices in the business office are not always followed.”

A VSC program measured solely on time, rather than miles, offers even greater value to the customer, he says. “Most drivers tend to have a better idea of how long they’ll keep the car rather than how many miles they might drive per year.

“Either way, products that attempt to improve and personalize the buying experience are always a good idea in the business office,” Lindsey says.

About the Author(s)

Jim Leman

Correspondent, WardsAuto

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