Otto Belovich believes it is a disservice to his customers -- especially those who buy used vehicles -- if he doesn't offer them the opportunity to purchase a service contract.
The owner of Cherry Capital Cadillac-Subaru in Traverse City, Mich., makes sure his finance and insurance staff always explain to customers the benefits of protecting themselves from costly mechanical repairs down the road. His managers tell them that prepaid maintenance is a good idea, too, as is a road hazard policy to cover mishaps to expensive tires and wheels.
About 65 percent of Belovich's used-car buyers take him up on the offers and spend an average of $1,500 to $1,800 to purchase one or more vehicle protection products, he said. That's about equal to the percentage of new-car customers who buy one or more products, he added.
Although the sales generate revenue for the dealership, Belovich said, the products protect consumers from expected out-of-pocket costs related to unexpected vehicle repairs. They also help with customer satisfaction by alleviating confusion over who should pay those costs, he said.
"I had a situation where I sold this fellow a used car and sold him a service contract that had a $100 deductible -- this is going back a few years," Belovich recalls. "He never had any issues. He comes in a year later and buys another used car, turns down the service contract, and guess what happened? Six or eight months later, he needed it.
"I covered it just to make him happy. Then I sold him a service contract."