November 2008 - Feature
Building an In-House PPM Program
No one questions the benefits of a pre-paid maintenance product, but what are the benefits of managing it in-house? F&I manager breaks down his store's PPM program, and discusses why employee discounts are a necessity.
By Jim Dirks
There are many advantages to having a pre-paid maintenance (PPM) program. It improves customer loyalty, exposure to new products, and keeps service advisors busy during the slow times. The question then is, what’s best for the dealership, an in-house or third-party-provided program? The answer really comes down to the dealership’s priorities.
Simply put, a pre-paid maintenance program is exactly what the name implies; an F&I product which allows the consumer to make a one-time payment for required maintenance and services under a predetermined period of time or number of services.
The best part of a PPM is it ensures that your customer will return to your store for services, creating opportunities for your advisors to upsell and make additional accessory sales. Most of all, a pre-paid maintenance plan can lead to a trade-in sale of a new vehicle. In the eight years I spent in the automotive retail industry, I cannot begin to count the number of trade-ins generated by a salesperson working the service lane.
At my store we run an in-house pre-paid maintenance program. Since that is what I am most familiar with, I’ll probably show a bias toward that approach. There are many advantages to using a third-party provider, but I prefer the control provided by an in-house program.
How many times have you had to contend with a disgruntled consumer when your vendor denied a benefit claim? With an in-house program, you decide whether or not to approve or deny the benefit. The control over customer satisfaction was reason enough for me to stay with an in-house approach.
However, there are some drawbacks to running such a program. For one, running an in-house program requires that the dealership maintain a separate account on the books for pre-paid maintenance income and expenses. If you’re not closely tracking both the revenue and expenses, you won’t know how profitable or costly the program is. This will also prevent you from making effective adjustments on the program.