A dealership finance and insurance manager keeps a broken drive shaft leaning against the wall of her office, says Jim Devitt, national sales manager at NAC, an extended-warranty firm.
When visitors ask why it's there, she tells them it's a failed part off her 4X4 vehicle. She adds that, had she not had an extended warranty, replacing the drive shaft would have cost her nearly $1,000.
She sells a lot of extended warranties with that approach.
“Many dealership business managers lack creativity, especially in the use of visuals to illustrate a point,” Devitt, a former service-contract sales trainer, says at the F&I Management and Technology conference in Las Vegas.
He tells of another business manager who keeps a bucket of parts, costing various amounts, on display in his office.
“He uses them to show — not just tell — why extended warranties are important,” Devitt says. “It helps demonstrate why most dealerships have two service technicians to every one car salesperson.”
He adds: “It cements your point when you tell a customer, ‘I agree with you that cars are better today and less likely to break down, but last month we had $107,000 in warranty repairs.’”
Yet, selling extended warranties is becoming increasingly tough today.
For one thing, a sharp drop in vehicle sales has reduced the number of prospects who might buy car-protection packages offered at dealerships.
And, due to the credit crunch, many lenders no longer extend auto-loan terms to include F&I and aftermarket products.
It makes selling extended warranties, typically the most popular F&I product, hard — but not impossible.
“There has been a lot of baggage about ESCs (extended-service contracts), but they should be presented as a value proposition to customers,” says Dennis Doyle, vice president-marketing and product development for GMAC LLC's dealer products and services.
Dealers should make sure their service managers and service advisors are selling that value, he says. “It's not just about selling products, it's about fostering long-term customer loyalty.”
F&I managers should be “teachers,” who educate customers, says Sharron Anania, CNA National Warranty Corp.'s vice president-sales.
Anania, a former F&I manager at a Chrysler dealership, recommends F&I personnel show customers the dealership service department.
On such facility tours, F&I staffers should point out the sophisticated equipment and emphasize that “it's no longer so much repairing parts as replacing them, and parts are expensive on today's complicated cars,” she says.
She adds: “You need to come across as a counselor and not as someone trying to sell a product.”
It's often easier to sell the vehicle than a warranty for it, says Kevin Hausch, a regional vice president at a Protective Life Corp. subsidiary.
“When was the last time someone said, ‘I want a service contract and a car to go with it?’” he says.
But contract sales can be increased from 36% at a typical dealership to 70% with a process that includes training, says Tom Murray, executive vice president of Resource Automotive.
“Training is important for everyone, even veterans,” he says. “Why do you think baseball spring training also is for athletes who've been playing professionally for 10 years?”
Murray tells of new dealership F&I staffers who outsell veterans because the former underwent sales training and the latter didn't.
“You only have a few minutes in the F&I office before a customer's attention goes off in different directions,” he says. “Do you want to wing it or follow a process?”
Some F&I managers bungle presentations by not asking enough qualifying questions, such as about how many miles a year will a purchased car be driven, Devitt says.
“They go into the sales pitch before they know the person in front of them,” he says. “Let customers know you are on their side and that you know them.”
Anania agrees. “During a presentation, every time you say, ‘You told me earlier…’ increases the chance of a sale,” she says. “But you can't say that if you didn't ask.”
With many dealerships on the ropes and looking for all opportunities, effectively selling extended warranties takes on even greater meaning.
“Be an active participant in your own rescue,” Murray says.