Repair lanes become route to service contracts

COO Michael Maroone: Shop sales of service plans helped lift AutoNation's average F&I income per vehicle 8 percent.
AutoNation Inc., the nation's largest dealership group, sold 35,000 prepaid maintenance plans in the fourth quarter last year -- about 40 percent of them from the service drive.

The extra sales captured in the service bays helped lift average finance and insurance income per vehicle 8 percent to $1,130, COO Michael Maroone told analysts during the company's latest conference call.

Although few dealerships will see AutoNation's high volume of service-lane sales, the economic downturn is prompting more dealers to peddle F&I products from the shop, vendors say.

With new-vehicle sales down, there's more traffic in the service drive than there is in the showroom. And products such as maintenance plans "are an important retention tool," Maroone said.

AutoNation's supplier, Safe-Guard Products International, of Atlanta, views shop sales as a hot growth opportunity for F&I.

"A dealer with 10 stores probably writes 150 service tickets a day in each store," says David Duncan, senior vice president of Safe-Guard. "Run the math. That's more than 30,000 customers per month, and there's definitely some low-hanging fruit there. If they have about 32,000 miles on the car, it's a great time to talk about extending the factory warranty."

Lackluster past

In the past, dealers dabbled in F&I sales from the shop, but the business quickly fizzled for a variety of reasons.

Most important, service writers lacked the know-how and motivation to sell the products. Dealers typically displayed brochures promoting service contracts in the service drive and slipped the service writer $5 to $10 to turn a curious customer over to the F&I office.

"They need to be paid at least $50 to make it worth the effort," says Dave Peacock, regional manager for DealerPro Training Solutions, a training firm in Gahanna, Ohio.

Prospects also can lose interest in the product when they're handed off to the F&I manager. The service writer built rapport with the customer and should be the one to close the sale, Peacock says.

Sapaugh Motors Inc., a St. Louis-area Chevrolet-Cadillac-Buick-GMC store, promotes a team environment. Service writers receive $50 for initiating service contract sales and introducing customers to the F&I manager. The service adviser stays with the customer while the F&I office completes the sale.

The shop, which writes about 100 service tickets a day, has sold as many as 20 service contracts in a month, though five contracts a month is the norm, says Joe Clemens, Sapaugh's general manager. About two-thirds of the dealership's customers bought a service contract when they purchased their car.

Easier payment

Finance managers can roll the price of products into a car payment when the customer is buying a vehicle, but payment options pose a roadblock for service writers. Few customers want to shell out $1,500 in cash for a service contract, though some might tack it onto their credit card bill.

"Customers need to have payment options," says Luis Garcia, director of training and development for Safe-Guard.

In the past few years, he says, finance companies specializing in these aftermarket sales started offering installment plans for six to 18 months. Some F&I vendors offer their own financing for customers.

Bruce Shipper, director of financial services for Shelly BMW in Buena Park, Calif., recently added Prizm Group's products to the menu of F&I items the dealership offers in the service drive.

"Prizm offers 0 percent financing on up to 18 months with 10 percent down," Shipper says.

At Shelly, about 10 percent of the gross profit made on F&I products comes from the service department, he says. Service writers make $50 to $100 per sale, depending on the dealership commission.

Adding F&I products to the menu of service work they already sell can be a challenge for service writers. They may have to thumb through a cumbersome guidebook to price a service contract.

Technology boost

But computer vendors are creating software that makes the process quicker. OptionSoft Technologies Inc., of Saratoga Springs, N.Y., unveiled an electronic menu designed for the service drive at the National Automobile Dealers Association convention in Orlando in February.

Ken Tomaro, co-owner of OptionSoft, says several vendors of aftermarket insurance products asked his company to provide them an electronic sales process for service writers. Many dealers already use electronic menu software in the F&I office.

DealerPro is introducing a short video presentation that service advisers can show customers on a computer screen. The video explains the benefits of purchasing an extended service contract. "We already offer this for services such as tire rotations," says DealerPro's Peacock.

In May, Safe-Guard will roll out a portal,, that allows service writers to present, price and remit contracts electronically. Service writers also can print customers a copy of the paperwork in the service drive. Normally, the multicopy forms would need to be printed in the F&I office.

AutoNation owes some of its success to the state-of-the-art technology it uses to present its maintenance plans, says Safe-Guard's Duncan.

The technology ensures the pricing is accurate, and it "reduces the process to a few simple steps," he says. "You don't want to have to train service writers to be F&I managers."

These F&I products can be sold successfully in the service shop.
• Extended service contracts
• Prepaid maintenance plans
• Roadside assistance
• Tire protection
• Key replacement
Source: Safe-Guard Products International