EFG CEO: Car dealers will lean on maintenance plans as repeat customer play

As vehicle prices cool, auto dealerships will have less ability to seek a profit margin on the front end of a sale, according to EFG Cos. CEO Jennifer Rappaport. Courting repeat customers will grow in importance for car dealerships — and lead to increased emphasis on the finance and insurance product of prepaid maintenance plans, she said.

"As you see ... those [front-end] dollars come down, you're going to have to look at where it makes the most sense to drive the greater portion of your margin," said Rappaport, who spoke to Automotive News in December following her promotion to CEO on Nov. 1. She had previously been COO of the company.

Repeat customers are among the least expensive sales that a dealership will make, Rappaport said. This means larger margins on a deal.

Both sales and service experiences at a car dealership drive repeat business, Rappaport said. She predicts that retailers will make a push for the latter with maintenance coverage.

"You're going to see maintenance programs become very popular again," she said. "Not that they've gone away, but they really will definitely be a driver."

One tactic would be retailers offering free maintenance for a preset time and then pitching the customer on the ability to extend or add to it, Rappaport said.

"Strategically speaking, F&I products do a wonderful job of increasing repeat and referral customers," she said.