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Curb Appeal: Prepaid Maintenance Revisited

August 2010, F&I and Showroom - Feature

by Michael Gorun

The VSC Bundle: With the flexibility of today’s new prepaid plans and the ability to sell them on virtually any vehicle, the opportunity to bundle them with your existing service contract has become easier then ever. The National Automobile Dealers Association recently reported that service-contract sales penetrations increased between 8 to 10 percent when bundled with prepaid maintenance plans.

AutoNation recently reported that, in one quarter, the dealer group sold more than 30,000 prepaid maintenance (PPM) plans, with a large percentage of them sold in the service lane. Products that link vehicle sales to future service department work have always been important, but in today’s margin-compressed retail environment, they’re critical.

In response, product providers are widening their focus and offering a slew of next-generation prepaid maintenance programs designed to make it easier for dealers to customize plans that appeal to their market.

At most dealerships, 18 to 20 percent of customers will return to the dealership for service work. Depending on the plan and the store, a prepaid maintenance plan can triple that number. Given that most brands will experience a 20 percent decrease in units in operation and service volume as a result of the market’s recent upheaval, prepaid maintenance plans represent an opportunity to gain back some ground.

Richer Content, More Value

All the advantages of selling a prepaid maintenance plan are rendered moot if customers don’t see the value in the plans. Fortunately, value is exactly what today’s next-generation plans address. While a traditional plan may only offer discounted prices on lube, oil and filter, tire rotation and wiper-blade replacement, today’s plans are designed to offer state-mandated inspections, loaner vehicles and flushes — all of which carry higher perceived customer value. This makes the plans easier to sell, whether they are presented in F&I or in the service drive.

While the first goal of a prepaid maintenance plan is to gain the customer’s affinity for your shop, the real value lies in upselling additional retail parts and services. I recommend that you give every vehicle that rolls into your shop a free, multipoint safety inspection. Doing so will allow your advisors to present legitimate upsell recommendations for repairs and services beyond those covered by the customer’s plan. This practice is especially effective for high-mileage vehicles that are three years or older. One common misconception is that holders of prepaid maintenance plans do not make good candidates for additional service presentations. This is far from accurate. In fact, they have demonstrated a predisposition to purchasing your service and are as agreeable to upsell efforts as any customer. The deciding factor is in the service advisor’s ability to present and sell additional services.

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