Service contracts are growing -- just slowly

Jim Henry is a special correspondent for Automotive News

For a while, the increase in extended-service contract sales penetration was so slow I wondered where all that effort was going. You know -- F&I "Boot Camp," sales in the service lane, menu-selling to every customer, etc.

Over time, it's clear that extended-service contracts have grown significantly. It was just slow growth, with some ups and downs.

According to the Power Information Network, about 32 percent of retail new-vehicle customers bought extended-service contracts in the first quarter (through March 18), up from about 30 percent a year earlier, 29 percent the year before that and 28 percent the year before that. OK, that's not exactly skyrocketing, but it's a positive trend.

Real-world numbers are probably even a little better because PIN doesn't capture service contracts unless they're sold at the same time as the vehicle. So PIN doesn't show service contracts sold in the service lane.

Some in the business say sales in the service lane aren't rising as fast as they would like, but those sales do appear to be going up.

Add in the fact that U.S. auto sales are increasing. That means higher sales penetration represents a bigger percent of a bigger number. So the picture is a little rosier than the numbers indicate.

Maybe all that effort is paying off after all.



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