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Upgrade your sales. Find out how to sell service contracts and keep steady profits rolling in.
If you can sell cars, you can sell service contracts. And if you can sell service contracts, you can keep more cash in your tank while you’re helping your customers. A service contract takes the worry out of the later cost of repairs and maintenance for car buyers. For you, it’s an upsell that guarantees more revenue and more customer loyalty.
What’s important to remember here is that every car buyer is different. Some are happy to take care of oil changes and basic repairs on their own. Others don’t want to have to think about anything except putting gas in the car. Anything else, from changing a light bulb to putting in a new starter, is out of their comfort zone.
So how do you create something that appeals to everyone? That’s low-cost enough that every customer would want it, but that also makes money for you? And how do you share the value of this add-on to buyers who may not like the idea of spending more money than they’re already putting into a car?
How to create and sell service contracts that no one will turn down
The first step is probably obvious, but you have to know your audience. For example, if you want to sell service contracts to mechanics who are buying from you, you’ll need a very different contract than you would for busy people who don’t want to deal with any mechanical or maintenance issues.
There’s also no rule that says you can’t have several service contract options. The point here is that you want something that’s an easy upsell.
To that effect, consider service contract levels. You can call them Level 1, 2, and 3, or Silver, Gold, and Platinum, or anything else that seems appropriate. What might those look like?
Maybe Level 1 includes two years of oil changes, filter changes, alignments, tire rotation, and fluid top-offs. Level 2 would consist of all of this for three years plus new brakes. Level 3 would encompass all of Level 2 for four years, plus a new set of tires (including balancing, mounting, etc.) at the end of the service contract. You could even add a Level 4 and cover all repairs and maintenance for five years.
The details, of course, can vary quite a bit. One of the significant factors is how to make it worth it for your dealership to sell service contracts, while making it affordable enough that people are willing to buy it. There’s no easy answer to this since there are so many factors that go into pricing. Whether it’s the cost of parts, the expected frequency of repairs or maintenance, or the specifics of what your service contracts may include, you’ll need to spend some time with your calculator and figure out pricing.
Outside of the actual price, however, there are ways to make it affordable for your customers. The most common approach is to wrap the cost of the service contract into the overall auto loan. So maybe that $200 monthly payment becomes $215 or $225.
What about the reluctant customer? No matter how affordable, there will be people who don’t see the value in add-ons like this. For these customers, you’ll need to devise a strategy to sell service contracts that really highlights the benefits.
For example, list everything side by side with the retail cost vs. what it would cost with the service contract. Even a basic oil change can be $50-$60. An alignment runs a little over $100, and new brakes can be $300-$400 and up. What does this look like compared to a service contract? Can you show customers exactly how much they would save on different services?
Even better, though, when you sell service contracts, you’re selling peace of mind. You customer won’t have to come up with $400 for new brakes because it’s already paid for. They won’t need to worry about many of the normal wear-and-tear expenses that can be difficult to fund if you don’t plan ahead.
Done right, service contracts can be a win-win situation for your dealership and for your customer.
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