Most consumers weigh the cost of replacement parts in their vehicle purchase decision, a recent survey shows. That could mean an opportunity for F&I managers to sell more service contracts.
The survey, conducted in 2015 and 2016 by AutoMD, found that 74 percent of respondents said the cost of replacement parts would affect their vehicle purchase decisions.
According to Tim Meenan, executive director of the Service Contract Industry Council, when customers buy a service contract, parts and labor “is what you’re really making a bargain for.”
Forty-three percent of new-vehicle buyers purchased a service contract in 2015, according to the National Automobile Dealers Association. Of the 1,000 AutoMD survey respondents, 59 percent said they planned to purchase a vehicle in the next six months, the majority of them expecting to buy a used vehicle.
Of the respondents who said the cost of replacement parts would not be a factor in their vehicle purchase decision, more than half said it was because it did not occur to them or they did not know where to look for the relevant information.
Consumers are open to learning about the value of a service contract, which gives dealers an opportunity to educate them. Meenan suggests dealers say: “Rather than worry about the cost of replacement parts, consider an extended warranty,” adding that a service contract brings relief if the car breaks down and that it’s included in the monthly payment.
A January Bankrate.com report found that two-thirds of consumers do not have enough savings for a $500 car repair.
That statistic, plus knowing that most consumers are interested in at least learning more about service contracts, gives dealers and F&I managers an advantage.
If F&I managers asked consumers what they would do if their car broke down, based on this data, a wise consumer would opt for a service contract.