Vehicle Service Contracts Promote Car Dealership Customer Loyalty

For dealers, VSCs generate F&I revenue for sure. But they also retain customers.

Jim Leman, Correspondent

February 11, 2016

1 Min Read
Longer vehicle life means many vehicles no longer covered by factory warranties
Longer vehicle life means many vehicles no longer covered by factory warranties.

Just about every auto consumer (92%) knows what an extended-service contract is, but only 37% buy them, according to a survey from F&I provider Assurant Solutions.

Yet several factors make service-agreement purchases attractive today for both car buyers and dealership sellers. Among them:

  • Longer vehicle life and years of ownership mean lots of vehicles still are in use well-beyond factory warranty expirations.

  • Some OEMs are curtailing once-lengthy warranties, increasing break-down anxiety for many buyers.

  • Many consumers lack disposable cash to readily pay for repairs, so extended repair coverage offers peace of mind.

For dealerships, service contracts generate F&I revenue for sure. But their strength in retaining service customers arguably is the best incentive for a dealership to sell more of them.

Dealers mostly focus extended-service-contract sales attention during the F&I stage of the sale.

But also promoting the F&I product on the dealership website can pay dividends. Online descriptions and benefits statements familiarize potential buyers at their leisure and in their comfort zone.

Buyers who are better informed about how service contracts provide value are more likely to purchase when they reach the F&I office.

Dealers should incorporate the same online tools to engage consumers early and often, say several F&I trainers.

Evolving digital F&I platforms that engage shoppers in a multi-sensory product explanation can help dealers promote a wide range of aftermarket products.

“Consumers familiar with these platforms in entertainment and other retail experiences trust immersion technology, which also can help dealers create stickier customer engagement with their products,” says Jim Maxim, Jr., president of MaximTrak Technologies, a provider of F&I digital platforms.

One type of early and effective immersion tool is the e-menu. Maxim cites a study by his company of 270 Fiat Chrysler dealers showing a 51% vehicle-service contract penetration lift from menu use versus non-menu use.

About the Author(s)

Jim Leman

Correspondent, WardsAuto

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