Two Minutes from Steady, Long-Term Service Revenue

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This article is only 500 or so words long. At the normal adult reading speed, you should be at its end in just two minutes. My goal in this brief time is to show how today’s dealer-managed prepaid maintenance programs generate fast cash, generate it long term, and boost retention 10 to 20 percent and more.

These are not the prepaid maintenance programs of yore. Consumers appreciate their high-value content. They give dealers complete control of the plan and its funds. They are free of other, bundled services or products offered by the plan provider you might not find useful. Instead, this new type of prepaid maintenance program is very dealer friendly:

  • They are self-managed. In other words, the dealer realizes all earned reserve or plan forfeiture money immediately and does not share any of it with an outside administrator.
  • They are specifically designed to be sold in the service lane.
  • They are highly customizable so the program is specific to the dealer’s market and marketing goals and services offered.
  • They simplify all plan processes; web-based software simplifies plan registration, service claim, premium submission, and redemption management.

How they work

Unlike many plans of yesterday, the dealer decides the elements which are in the dealership’s plans and its retail sell price. Vendors offering these self-administered programs help the dealer create the right package of prepaid services specifically for the unique customer demographics of each store.

These are high-value packages: LOF, tire rotations, fluid service(s), and wiper replacement, for instance, whatever the dealer chooses, based on what will appeal best to the local market and the dealership’s marketing goals.

Dealers offer these plans to used vehicle owners through the F&I process, often at a retail price of around $499, and through service at a retail of around $299 for fewer services. Sales penetration in service is generally around 18 percent as the service lance customer is already pre-disposed to buying the service. Simply offer a plan at that time and you will increase your gross sales immediately. And remember service lane volume is much higher than F&I so it is not unusual to see monthly plan sales exceed 100.

Plans sold to pre-owned vehicle purchasers typically bump after the sale dealership service use from about five to eight percent to upwards of 60 percent. While current industry statistics indicate that roughly one in five customers return to the dealership for service in general, holders of these plans are visiting their selling dealers at a rate of over 70 percent. These new style of plans are not generally brand or model specific and can be used to garner competitive make service also, if desired. Data shows that the average customer RO amount generated by a plan holder is about $128 for each visit and that is in addition to the amount the amount they already pre-paid.

On average, dealers marketing these plans see an 80 percent return rate, meaning customers who buy the plan are using 80 percent or more of the plan’s elements during a typical 36-month plan life. On average, PPM holders return to the issuing dealership four to five times a year rather than a more typical non-plan frequency of once or twice for needed maintenance.

And remember a customer who services with you regularly will most like purchase another vehicle from you.

OK, my two minutes are up…and the secret is out.

Michael Gorun is the managing partner and founder of MediaTrac, a company he started in 2003 after nearly 25 years in operational management positions for Ford, Nissan and General Motors. You can reach Michael at:



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