Dealer Insights – March/April 2011 - F&I products

March 31, 2011

Are you paving your service lanes with promise? 

A growing number of owners are finding unconventional ways to put their dealerships’ service lanes to better use by expanding product lines beyond batteries and floor mats. If your store hasn’t tried selling service contracts and other F&I products while customers are in your shop, you may be missing some golden opportunities.

Why take on F&I products? 

Although new car sales have plunged during the last few years, core customers continue to drive to their dealerships’ service lanes for scheduled maintenance and repairs. As a result, some stores are putting new emphasis on their service area by extending the hours or adding a shift.
Dealerships also are finding that it’s easier to sell F&I products at the time of a costly repair, or when the customers’ warranties are about to expire, than it was at the sales closing. As a result, more service writers are being trained to talk about the value of service contracts and prepaid maintenance plans and how to close them.
“What do I have to gain?” you may ask. Consider this: If your service area sells only two service contracts per week for the next year, that would be more than 100 additional customers a year who would be tied to your dealership for the next, say, four years. And keep in mind that the first 180 days after new- or used-car delivery is generally considered the most critical time for a service area to establish a relationship with customers. It’s that relationship that keeps them loyal to you.

Who’s the target customer? 

Take Shirley Smith and her recent-model SUV. The service writer, armed with Shirley’s customer information, asks her if she knows that her warranty is going to expire in six weeks. Shirley becomes more interested in purchasing a service contract than she was when she first bought her new vehicle.

Or using a different technique, the service writer asks Shirley to figure out when her 36-month warranty will end. Getting customers to realize on their own what they’ll be paying for service can be a powerful tool. This is also a good time to point out that many auto parts aren’t repairable today, and then provide some pricing examples for replacement parts. The customer will likely see the wisdom of a service contract.

Or consider Sam, who wasn’t interested in tire and wheel protection when he bought his 4-year-old sedan from you. But he’s changed his mind now that he’s paying for his first tire repair. Keep in mind that tire and wheel protection is one of the best selling F&I products, along with service contracts and prepaid maintenance plans, guaranteed asset protection, insurance, and security products, according to AutoNation, one of the country’s largest dealership groups.

What else should you consider? 

The service writer can use the dealership’s customer relationship management (CRM) software to find out when your customers’ warranties are up and prepare for their next visit. (Service might also send an e-mail notice before the customer’s next visit.) Preparation also includes making sure that your service area has up-to-date brochures on the F&I products you’re promoting.

A few years ago, when selling these products in the service lane was new, the service writer would get the customer interested in the product and then walk him or her to the F&I department, where an F&I person would close the sale. But these days well-trained service writers usually handle the promotion and sale in the service area, either in the customers’ waiting room or by the service writer’s station. This quickens the process for the time-conscious customer — and, because the sale will be recorded to the service area, heightens service manager motivation.

The service manager should coordinate training, typically by the store’s F&I manager, a contract provider or another vendor. The service manager also should set sales goals and evaluate individual performance.

Give customers an incentive 

It’s a sad fact that many customers perceive dealership service pricing to be higher than pricing at an independent garage. But providing value-added products, such as service contracts and parts warranties, can sharpen your competitive edge for the life of your customers’ cars.

Sidebar:Guarding against fraud
Some less-than-honest service writers might consider selling a service contract to a customer whose vehicle already needs work. Let’s say that the customer needs $4,000 worth of repairs. The service writer convinces the customer to buy a service contract for $2,000 but advises the customer to wait several weeks before getting the work done. As a result, the customer saves $2,000, the employee gets a glowing evaluation and a wink — and the dealership is out $2,000.
To guard against such fraud, you should:

  • Charge a high deductible if the customer brings in his car for repairs during the initial life of the contract, or
  • Include in the contract a rule that the customer can’t file a claim for the first 90 days.

You certainly don’t want to lose money on the F&I products you sell in the service lane. So make sure that internal controls are in place.


Dealer Insights – March/April 2011

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