Svc. Agreements – High Profit, Low Aggravation
Most dealers want to know how to sell more used cars with high profit and low aggravation. Using a service agreement is a key that is often overlooked.
High Profit
The used car dealer’s competition is the new car dealer’s used car department. Franchised dealers usually have a certification program, which despite the additional reconditioning cost and manufacturer’s fee, gives sales personnel added confidence in the unit and provides peace of mind for the buyer.
For dealers who do not have access to a certification program, many service agreement companies have either a certification plan or a minimal protection plan the dealership can offer with the sale. Now, before you start rolling your eyes, consider that based upon the year and mileage of the unit, the finance manager may be able to offer additional coverage with a service agreement that has extended terms. This process is known as “up selling”.
Customers always like knowing what protection they are getting with the purchase of a vehicle. Many customers prefer extended protection as a hedge against the future cost of repairs. The lead of the certification plan provides an excellent segue into other opportunities.
Low Aggravation
The aggravation meter goes into overload when a customer pays premium dollars for a policy and the company rejects a claim. Dealers should look for a service provider who can limit their contingent liability and provide reliable customer service.
In most cases, the dealership makes the most profit from the sale of service agreements, which is why the contingent liability usually falls to the dealer. Dealers should therefore exercise due diligence to find the right service agreement provider. Experience has shown that checking out both the administrator and the insurance company that backs the administrator is time well spent. When the rubber meets the road, the state department of insurance usually follows the money trail. And the local better business bureau can provide a history of customer complaints.
The Key to Service Agreements
For high profit and low aggravation, offer a policy that provides outstanding service. Ensure that the dealership is fully protected. Under-sell the policy so that it is easy to over-deliver to the customer. Make heroes of your dealership personnel.
Dealer Marketing Magazine, October 2002.