Most customers buy five-year tire-and-wheel protection policies, Conn says.
Tire-and-wheel protection generally covers the repair or replacement of tires or wheel rims damaged by metal, nails, glass debris and potholes for the duration of the policy. It includes mounting, balancing and labor, Conn says.
In part because of the recent popularity of such policies, the number of claims has risen, Conn says. In turn, so has the price of a protection policy.
"What we pay for a five-year policy on wheel-and-tire coverage has gone up from $290 five years ago to up to $700," Conn says. "It keeps getting re-evaluated because the cost of replacements and repairs keeps going up."
The dealership group has raised the prices it charges consumers accordingly.
Customers can expect some tire-and-wheel protection to start at around $500 for a five-year program on brands such as Volkswagen and Subaru, Conn says. For brands such as Infiniti, it can start at $800; while for BMW it starts at $1,000 or higher, he says.
The dealer's margins are large. Conn says that if the dealership pays $400 for a policy, it will sell that policy to a consumer for about $800.
Conn says those costs are continually rising based on loss ratios.
Indeed, he expected the price he pays for tire-and-wheel protection to jump $300 for BMW vehicles and about $100 to $150 for other brands this month. He said he planned to hike prices for consumers accordingly.
A dealership usually replaces rather than repairs the tire or wheel. Ciccolo of Village Automotive Group says that costs significantly more. "But customers don't want a repaired tire, where we put a simple plug in it," he says.
His group's 10 stores (Volvo, Saab, Honda, Hyundai, Cadillac, Nissan, Porsche and Audi) sell about 7,600 new and used vehicles a year.
Ciccolo says claims on tire-and-wheel protection are up at least 25 percent from four years ago at his stores. His sales of these products have risen 40 percent in that time frame.
Village Automotive Group raised the price it charges for tire-and-wheel protection about six months ago. It used to charge $295 but now charges $600. Ciccolo says he pays about $400 for the product.