Prepaid Plans Can Sell – If They Make F&I Menu Cut

They are sold at some auto dealerships, given away at others.

Jim Leman, Correspondent

November 4, 2015

2 Min Read
Some dealers use prepaid plans for backshop customer retention
Some dealers use prepaid plans for back-shop customer retention.

Dealers who put prepaid maintenance plans on their F&I menu typically sell them, but getting them on the menu in the first place can be a challenge, say plan providers.

First, it isn’t a high-commission product. Already a discounted benefit, dealers aren’t inclined to highly incentivize prepaid maintenance plans.

Second, it may mean another product’s removal to make room for listing them, if an F&I menu has lots of items already.

Third, dealers and automakers may offer the plans at no charge (and no commission), as a closer and a service-work retention tool, generally not a bad idea.

Ninety-five percent of customers who buy the plans use the issuing dealer’s service department and on average spend $110 to $130 after service-work upselling, says Mike Gorun, founder and consultant for F&I product provider Performance Loyalty Group.

Dealers who put prepaid maintenance plans on their F&I menus see sales increase, he says. “In stores where the dealers have made it part of the F&I menu presentation, penetration can jump to 75%.”

Jon Brenner, owner of The Dealer Advantage, an F&I product provider, says many of his dealer clients give away a 1-year maintenance plan to new buyers as a closing and retention device. He also offers multi-year plans that incentivize F&I managers.

Given the back-end revenue these plans can generate, Brenner says dealers have plenty of money available to incentivize F&I’s selling of the product. 

“Because there’s a 45% to 75% nonuse factor with these plans – customers don’t use all the services – the dealer compiles a lot of money in the store’s PPM reserve funds,” he says.

Marketing plans serves another useful F&I role, says Jan Kelly of F&I consultants Kelly Enterprises. “With leasing on the rise, service-contract sales are waning. “Having a pre-paid maintenance product to talk about in the place of a service contract is both a benefit to the dealership and to the customer.”

About the Author(s)

Jim Leman

Correspondent, WardsAuto

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