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From: Jared Hamilton
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Mike Gorun

Mike Gorun Managing Partner/CEO

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Are You Taking The Right Approach To Your Pre-Paid Maintenance Programs?

With service departments finally getting the credit due to them for contributing to the growth and profit of dealerships, pre-paid maintenance programs (PMP) are starting to make a huge impact on the overall profit of dealerships as well.

I think it is well established that most PMPs are being sold in the F & I department. But is that the only place that they can make the dealership money? Pricing your pre-paid maintenance program is a big part in whether a customer will even consider purchasing a plan.  Recently we noticed that dealerships were overcharging their maintenance plans, arguing “what’s the point if we can’t make profit on the program?”, which made us realize that some dealerships are taking the wrong approach to their PMP.

When selling a maintenance plan to a customer, you tell them that they are saving money in the long-run and that they will not have to worry about the maintenance on their vehicle for 2 -5 years, depending on the length of the plan they choose. But when looking at the benefits from a dealership standpoint, there are several things to look at, and not just the profit. If you are concerned about losing your shirt when selling PMPs, then consider building your own PMP through a third-party provider like UltraCare and keep more profit for yourself. By cutting out some of the costs associated with most PMPs, you can lower your prices and still come out ahead.

What should you consider when looking for a pre-paid maintenance program?

Pre-Paid Maintenance programs, when delivered effectively, increase customer loyalty and create repeat business for your service department AND sales department. A customer is seven times more likely to return to your dealership if they have purchased a maintenance program from you. In addition, customers are 83% more likely to purchase their next vehicle from you if they visit your service department regularly.

Try to keep the bigger picture in mind. By stepping out of the box of profit and stepping into the one of loyalty, you can start to see the forest and not just the trees right in front of you. PMP are a great tool for dealerships, but if not used correctly, they will be unsuccessful and can actually hurt your reputation with your customers.

So, it is not just about adding to the profit of the sell. It is about adding a loyal customer that will return multiple times and more than triple that number. Price your programs competitively and to the advantage of the customer. In the long-run you will make much more profit. Not to mention you will have a happy customer who will bring more customers to your business through word of mouth.

What successes have you had with your PMP? What are some of the frustrations you have with the PMP that you offer?

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