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.

[PAGEBREAK] Building a PPM

In our case, we keep our pre-paid maintenance simple. We do this to avoid complicated explanations and confusion over what it does and doesn’t provide. Anything and everything that a specific owners’ manual requires is already paid for in terms of both parts and labor. This is done without placing limits on the number of services.

We also offer an unlimited amount of service visits for one, two or three years. This means the rider who puts 20,000 miles annually on his motorcycle will experience a huge discount on his service and maintenance costs. For that reason you may choose to offer a limited number of services. In our experience, however, offering unlimited services over the program’s lifespan results in at least 50 percent of the program’s total sales revenue being gross profit.

In addition, we include one free battery replacement at no charge with our three-year program. In the event your vehicle is damaged in an accident, we will absorb the first $250 of your insurance deductable if the repairs are made at our store.

We also provide all of our pre-paid maintenance customers with free priority service. This means if the customer brings his or her vehicle in for a scheduled service before noon, he or she will get the vehicle back the same day. If the vehicle is brought in after 12 p.m., the customer will get it back the next day. In other words, our service department uses priority service. And why wouldn’t you give priority service to someone who paid you two years ago for vehicle maintenance?

[PAGEBREAK] Making the Program Customer-Friendly

Upon enrollment in the program our customers are given their copy of the enrollment form and a laminated member card. The card is the same size as a driver’s license and easily fits into customers’ wallets. When they bring their vehicle in for service, they simply show their pre-paid member card to the service advisor and their vehicle is immediately brought into the shop. The repair order is then charged against the program’s in-house account.

We even honor the benefit at other dealerships. If the customer is on vacation and his or her vehicle is due for service or the customer moves during their program period, we simply instruct him or her to visit a local franchise dealer and have that dealer call us. We then pay that service bill on the customer’s behalf using our in-house account.

Determining Pricing

The amount you charge for your pre-paid maintenance program is ultimately up to your store. How you determine what to charge is not something this article can intelligently broach. Demographics in each area of the country will play a part here. What’s fair in one area may be way too high or way too low in other areas.

I do want to strongly suggest that you discount the program for your employees. Ideally, you want all of your employees to have this program on their powersports vehicles. Why? So that the salespeople, the parts department staff, the F&I manager, the service advisors, service technicians, and even your administrative staff will all have the same answer if a customer happens to ask them about the program. “Yes sir/ma’am! I have it on my bike and I love it!”

I would even suggest making the program ridiculously inexpensive for your employees so they will all participate. The additional revenue from sales generated by employee referrals will make up for the lost revenue from the employee discounts.

Jim Dirks can be reached at jim.dirks@bobit.com.