Sell a service contract on a lease? It's all in the pitch
|Jamie LaReau covers auto dealers for Automotive News|
For dealers, a lease deal usually means a bum deal on the back end.
The sale of a high-profit product such as an extended-service contract is typically off the table.
But with many import and luxury brands offering leases, F&I managers need to find a way to make a lease as profitable as a financed car sale can be.
One F&I trainer, who asked to not be identified, says he teaches dealership clients to quiz lease customers on how likely they are -- on a scale from one (unlikely) to 10 (almost certain) -- to buy the vehicle when the lease is up. Based on the customer's response, the dealership presents him or her with a tailored lease menu, the trainer says.
For example, the trainer says, if a lease customer is at a 9 or 10 in terms of buying the vehicle at lease end, the F&I manager presents a menu encouraging the purchase of an extended-service contract by explaining to the customer that if he buys the car, his service coverage will already be in place when the manufacturer's warranty expires.
The F&I manager further explains to the customer that if he decides not to buy the leased vehicle when the lease is up, he would get his money back on the unused portion of the extended-service contract minus a $50 cancellation fee. That makes it an appealing offer, the trainer says. The service contract runs concurrently with the manufacturer's warranty. So, for example, if the customer had a 6-year/100,000-mile extended-service contract and put 50,000 miles on the vehicle and had it for 3 years, he would get back 50 percent of the purchase price of the contract minus $50.
"He gets back 50 percent of his cost minus the $50 to put down on another lease or keep it for cash," the trainer says.
He teaches dealership clients to "lay out the choices for customers."
"What it does," he says, "is break down the fear barrier and it changes it to a trust situation."
And it allows lease customers the chance to consider more F&I products than just the popular ones, such as ding protection, he says.
A half dozen or so of this trainer's dealership clients have used his lease menu for a year and a half. They report higher sales of extended-service contracts among lease customers, he says, adding: "There are two things that can crap out an F&I officer: a cash deal and a lease deal. But our job is still to show them every product, every time."
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