Question of the day
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What are you doing to increase sales and margins of service contracts and other insurance products? Is it working?
Dennis Patton, COO of multifranchise Cochran Auto Group in Monroeville, Pa.: "We do a lot of leasing, so we're pushing maintenance contracts. Pennsylvania just removed the double-markup laws where they capped the markup dealers could put on service contracts, but the pricing hasn't changed that much. We're doing a lot of value-added products, focusing on retention through service, as opposed to theft products like vehicle-etch that you see in New York."
Pete DeLongchamps, vice president of financial services and manufacturer relations at Group 1 Automotive: "We focused on increasing our penetration in service contracts, from 35 percent of our sales to 38 percent now. We might go to 40. We did it by limiting our menu of options. We think service contracts are good for our customers and they're good for us. But the options have to be customer-centric. So we mainly focus on paint protection policies, dent protection, fabric protection. Those are things that keep up the value of the car -- which also helps us at trade-in time."
Mark Scarpelli, owner of Raymond Auto Group (Chevrolet-Kia) in Antioch, Ill.: "It all depends on the backer. The dealer has to believe in the product and provide value. People want to feel covered. There are some real gorillas getting into the market, so there is more validity to these programs than in the past when some of these providers went bust. Having good, strong backers means we have more confidence in their product."
Todd Snell, CEO of Snell Cos. (Buick-GMC-Cadillac) in Mankato, Minn.: "Customers like prepaid maintenance. They like the idea of paying for gas, paying for insurance, and, boom, done. The key is being seamless about it, especially with younger buyers. They need that."
Barry Lundgren, dealer principal of Lundgren Honda in Auburn, Mass.: "We're able to set our own prices on contracts because I own my own reinsurance company. Just this past week, we rolled out a new pricing plan that I think will result in more extended warranties -- we price the product by the mile. And the customer can see what their price-per-mile is. It's transparent and it's more compelling for consumers and makes the warranties easier to sell."
Gary Reynolds, president of Reynolds' Garage and Marine Inc. (Subaru) in Lyme, Conn.: "Our extraordinary effort to sell service contracts is to do the ordinary with everyone. With every single customer we present the menu, show them the benefits, and let them make their own decision. During the recession, our penetration was about the same but our cancellations had gone up. We thought it was maybe because people got home and looked and their contracts and then canceled them in an effort to save some money. Today I wouldn't say it's back to normal. Let's just say maybe we're establishing a new normal."
