Pegasystems’ recent study that found the majority of drivers (63 percent) do not have active extended warranties despite seeing their value prompted the team at GWC Warranty to compile a trio of recommendations to help dealerships and their finance offices turn that trend.
The study of more than 1,000 consumers indicated the biggest barriers to consumers purchasing a warranty include cost (35 percent), not thinking they need one (32 percent), and lack of availability at the time of purchase (29 percent).
“The good news is that dealers can easily clear these hurdles with the right program in place,” GWC Warranty said in a recent blog post.
The company took a deeper look into the hurdles that stop customers from buying a vehicle service contract and how F&I professionals can overcome those obstacles.
While 35 percent of customers said they can’t afford a service contract, GWC Warranty suggested this approach.
“If you talk about the small increase in monthly payment as compared to what a major repair could do to a tight monthly budget, it’s easy to paint the picture that allows you to ask which scenario is easier to withstand,” the company said.
“With so many used car buyers on tight monthly budgets, a service contract’s monthly investment can easily pay off in the long run,” GWC continued.
Not thinking they need one
GWC Warranty reiterated that the Pegasystems research found 32 percent of customers think they’ll never encounter the need for service contract. GWC Warranty recommended that dealership ask the simple question of how long the customer plans on owning the vehicle he or she is purchasing.
“With the average length of ownership on the rise, chances are your customers will be in their vehicles for a long time,” GWC Warranty said.
“Used cars are inherently more likely to break down, especially as they approach and surpass 100,000 miles, making it more likely than ever before that a customer will need a VSC at some point during his or her ownership,” the company added.
Lack of availability at the time of purchase.
To solve for the 29 percent of customers who aren’t offered a VSC at the time of purchase, GWC emphasized that dealerships should follow what it called the 300-percent rule.
GWC Warranty explained the first step is having a service contract provider that offers the product versatility — from both a vehicle and term perspective — that fits your inventory.
“Once that’s in place, it’s vital that you present 100 percent of your products to 100 percent of your customers 100 percent of the time,” GWC Warranty said.
“You’ll never bat 1.000, but you’ll get better at your presentation as you continue to get real-world practice, and you’ll inevitably see the results in your F&I profits,” the company went on to say.