In an age where new cars are delayed off of the assembly line, used cars are in high demand, and everything costs more than it used to, moving metal and selling cars can be problematic. While fighting to keep inventory up and customers coming in the door, many dealerships are looking for new ways to get customers coming back.
One answer to the question of keeping both the customer and dealership happy is to sell extended warranty plans.
Extended Warranties 101
Most auto dealerships are aware of manufacturer warranties. The automaker foots the bill for certain repairs, defects, and recalls. An extended warranty works in the same sense but covers a more comprehensive list of components and conditions.
A survey from Consumer Reports suggests that the average price for something like a Ford extended warranty costs around $1,200. Of course, service contracts can have costs all over the scale. At the same time, the median savings for repairs covered under this Ford extended warranty is only $837. Moreover, only about 45% of vehicle owners who purchase this service contract actually use it.
When you factor in the actual profit from most repairs, a service contract can result in a solid profit for the dealership. These service plans also give drivers peace of mind that there is a solution if something happens to their vehicles.
Overcoming The Negative Reputation
Because extended warranties can come from the manufacturer, a dealership, or a third-party organization, many drivers have an overall negative view of these programs. In some cases, they get robocalls or spam messages from companies trying to sucker someone into buying something like a Chevy, Hyundai, Honda, or Ford extended warranty. That means sales and service advisors have to overcome a predetermined bias against these service plans.
Some dealerships have a bad reputation of trying to slip in an extended warranty into the overall sale. While using a service plan is a valuable part of the final negotiation, tricking customers into adding these warranties isn’t going to build goodwill and keep them coming back.
Show. Don’t Tell
One of the most important tenants for writing movies is also a critical part of warranty sales. The idea is to show the audience something instead of just telling them. In terms of a Ford extended warranty, it helps to make the service real to shoppers.
For example, you could ask the shopper about their last couple of major auto repairs and what they had to pay for it. You could also just show some real-life examples. A fuel pump replacement on a Ford Explorer costs an average of $651 to $994 to replace. This single repair covers a good portion of most extended warranty plans.
Ford has an average annual repair cost of around $775 per year, which is a touch higher than the $652 industry average. Showing your customers the actual numbers and real-life situations can help them see that an extended warranty is actually a good deal and not some kind of elaborate scam.
Sell The Benefit, Not The Features
It’s easy to get caught up in explaining to customers all of the features of an extended warranty plan. You might show them a list of all of the covered components, average cost savings, and reasons why an extended warranty is a prudent purchase. At the end of the day, features don’t make sales, but benefits do.
Instead of just rattling off lists and figures, turn features into relatable benefits. The number one benefit of an extended warranty is peace of mind. Drivers don’t have to worry about where they’ll get the money to cover the cost of that weird clicking they hear or the warning light that blinds them from their dashboard. These drivers know their extended warranty has them covered. The driver without the warranty isn’t going to be as stress-free.
Think of it this way: features stimulate the logical side of the brain. This is an important part of the car-buying experience, especially if you can wrap the service contract into the loan. Benefits stimulate emotions, which is the other half of the game.
Keep Customers Happy With an Extended Warranty Plan
Whether a customer is buying a service contract for a new car, a recently used car purchase, or a car they’ve had for years, you are going to accomplish two things. First, the customer will drive with confidence and peace of mind. That turns directly into a positive feeling about their experience with your dealership. When a friend or family member is looking to buy a vehicle, where do you think your customer is going to send them?
The other thing you’ll do is keep customers coming back to your location. When this driver takes advantage of their coverage, you have another chance to impress them and build up your reputation. You also have the opportunity to show them your updated inventory or offer other services.
There’s never been a better time to sell extended warranties than right now. Talk to your staff and come up with a plan, and everyone will win.
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