Reinventing the service contract for EVs

As we enter the era of electric vehicles (EVs), one of the biggest challenges the F&I office will face is consumer perception that service contracts aren’t needed on EVs. If there are no oil changes, no engine or transmission and fewer moving parts, why would an EV owner need a vehicle service contract (VSC)?

F&I managers may need training to deal with this objection. According to APCO data, 75 percent of VSC claims are on items that exist on EVs, such as tires, brakes, electronics and air conditioning. Only 25 percent of claims are on the powertrain.

That’s why it will be the F&I managers’ job to educate EV shoppers on the following.

High Cost of Repairs

While EV owners can save money in the short term due to lower fuel and maintenance costs, the cost of EV ownership rises over time.

EV repair costs are significantly higher than gas-powered vehicles, due to the need for highly trained technicians and the fact that parts are more likely to be replaced than repaired. EVs are also loaded with complex components that come with hefty price tags, such as the drive motor, EV battery, battery control module, charger, and auxiliary heater.

Consumers will need to know whether their roadside assistance covers the cost of transporting their EV to the nearest charger, in the event that their battery dies. If not, they will want to opt for a service contract that does provide that service. Plus, if their EV is in the shop for a covered repair, a service contract can help with substitute transportation and trip interruption costs.

Computers on Wheels

Many people purchase extended warranties for computers and cell phones, even though these products don’t have any moving parts. By focusing on the complexity of electronics and other components in EVs, F&I managers can tap into the same motivations that prompt consumers to purchase coverage for cell phones. EVs are essentially computers on wheels, so buyers should see the value in protecting their investment.

Maintenance Intervals

For dealerships, an obvious downside to EVs is the loss of regularly scheduled, routine maintenance. Dealers may need to get creative in order to get customers to bring in their vehicles. 

One thing worth considering is whether your dealership can create a different type of maintenance interval for customers. Could you focus on safety checks, topping off fluids, battery checks and replacing windshield wipers? A free car wash would also be highly appreciated by most people. 

The goal is to get consumers to bring in their vehicles at least twice a year. Once EVs are in your service bays, there will still be opportunities for service work. 

Another option is to get into tires. EVs are heavier than combustion vehicles, so they cause greater wear and tear on tires. Try offering free tire rotations and free snow tire storage.

Create Value Adds

With a reduced need for service, how will your dealership maintain relationships with EV owners? It might be worthwhile to create a value ad designed to bring customers in. BMW driver clinics are popular with BMW owners; what about creating an EV driver clinic? The focus could be educational, teaching customers how to use the software, maximize their vehicle performance, and extend battery life. Clinics can be conducted live at your store and/or presented in an online format.<

Finally, the cost of VSCs for EVs will likely be lower due to reduced maintenance costs. What will your dealership do with that opportunity? Think about what is next on the list that you want to have that customer cover, and why? For example, as batteries age, the value of an EV drops significantly. In the event of a total loss, GAP insurance helps to protect consumers against that drop in value.

As EVs become more available, it will be critical to educate car shoppers about the value and benefits associated with VSCs. Not only does a VSC sale benefit the dealership’s bottom line; for the consumer, a VSC provides peace of mind and a sense of protection on a significant investment. 

About APCO Holdings, LLC

Since 1984, APCO has grown to become a leading provider and administrator of F&I products for the auto industry. Built on a foundation of financial security and a commitment to understanding our customers' needs, APCO is a trusted partner to some of the most well-respected insurers, highly successful dealerships, and leading auto industry players in the country. The company markets its products using the EasyCare, GWC Warranty, and MemberCare brands, as well as other private label products, through a network of independent agents and an internal salesforce that specialize in consulting with and servicing the automotive dealership markets. EasyCare, GWC Warranty, and MemberCare F&I products are the only "MotorTrend® Recommended Best Buy" in the industry. They also carry top ratings from the Better Business Bureau, have protected over 11 million customers, and have paid over $3.5 billion in claims.