Even modest sales of prepaid plans add to the profitability of a dealership's fixed operations, says Fidelis President Ryan Williams. A $19.95 oil change typically produces an average repair order of $86, Williams estimates.
Fidelis provides prepaid plans to about 800 U.S. dealerships and dealership groups. The company charges its dealership customers a one-time setup fee of $499 for prepaid plans, plus $199 for each additional store.
Fidelis also collects a fee for each plan a dealer sells. That amount varies, Williams says, although another Fidelis official estimates it averages $30 per consumer.
Sixty percent of new- and used-vehicle owners buy a Fidelis plan, its dealers report. And about 70 percent of those buyers return to the dealership for service after the plan expires, Williams says.
"Forty percent of all our dealers do a complimentary giveaway of a one- or two-year plan," Williams adds.
Paradise Chevrolet-Cadillac in Temecula, Calif., includes a lifetime oil-change plan with each new and used General Motors brand vehicle it sells. The plan is good for as long as the buyer owns the vehicle but cannot be transferred to a new owner.
Service Manager Doug Ritchey says the dealership typically charges $80 for an oil change using synthetic oil and for related services, making the plan valuable.
Mike Armstrong, the dealership's service director, adds: "We sold 800 vehicles with lifetime oil-change plans in December. It has been a huge retention tool for us."
Keffer Chrysler-Jeep-Dodge-Ram in Charlotte, N.C., gives new- and used-vehicle buyers coupons for two free oil changes at the dealership to encourage them to buy prepaid maintenance plans offered by Mopar, the service organization of Fiat Chrysler Automobiles.
One popular plan charges $129 for four oil changes over two years, with semisynthetic oil and filter, says A.J. Bitterman, the dealership's fixed operations director. The dealership generally charges $55 for a single oil change, he says.
Bitterman notes that the dealership pays FCA $120 for the two-year plan. "We don't mark the [prepaid plans] up much," he says. "For us, they are more important as retention tools."
Nearly 40 percent of customers buy the two-year prepaid oil change plan from the dealership, Bitterman says.
A good experience with a dealership's service department can build trust and result in repeat visits, O'Reilly of Western Michigan University says. But that may not encourage vehicle owners to pay upfront for services down the line, she adds.
And the potential exists for a customer service headache, she warns, if buyers of prepaid maintenance plans want their money back after a poor service experience.
Williams of Fidelis says prepaid maintenance makes such complaints less likely, "as customers come in much more frequently and real relationships are forged."
"With our millions of claims and services performed," he says, "I am not aware of [a refund demand] ever happening."