Sales penetration for prepaid maintenance in the last quarter of 2011 was 15.7 percent, according to Maritz.
“It is still low, but it is growing,” said Chris Travell, vice president of strategic consulting for Maritz’s automotive research group.
Penetration was much higher for extended-service contracts at 30.7 percent, about even with the 2011 model year, Maritz said.
Dealerships often pitch prepaid maintenance as a way to beat future price increases, but Travell said convenience is probably a bigger factor in making the sale.
“If you are a customer, it is more convenient to know what you will spend and how you will spend it,” he said. “Depending on how it is financed, you can also include it in the monthly payment, and to some extent, that means it’s out of sight and out of mind.” .
Mike Maroone, COO of AutoNation Inc., has said his company is focusing on selling prepaid maintenance and extended-service contracts because those products encourage loyalty and represent an obvious value to customers. He wouldn’t disclose AutoNation’s sales penetration for prepaid maintenance, but he said it was on the rise.
Meanwhile, Group 1 Automotive reported that for the first quarter of 2012, its sales penetration for prepaid maintenance was only 8 percent, even with a year earlier. In contrast, its extended-service contract penetration was 39 percent, up from 35 percent.
Lithia’s DeBoer, in a phone interview in April after Lithia announced its first-quarter results, said his group started offering Lifetime Oil & Filter around 10 years ago. For the first quarter, sales penetration for that product was 37 percent, down from 38 percent a year earlier.
The idea is to cultivate loyalty among those customers. Said DeBoer: “They have a higher repeat business within our service department.”
Jamie LaReau contributed to this report