Friday 12/21/2018

The New Service Contract Alternative


New vehicles are more likely to resemble a rolling computer lab, in contrast to the utilitarian transportation of yesteryear.  As technology continues to advance, with it comes numerous amenities available to today’s car buying consumer. Regardless of the vehicle type, trucks, crossovers or cars, in both basic economy and luxury form, these convenience features are offered as optional or standard equipment. Many of these options are so new, they were not even contemplated in mechanical breakdown coverage a few short years ago. 

The addition of features like back-up cameras, proximity cruise control, lane departure warnings, to name a few, coupled with vehicles’ drivetrain components being built better than ever, can potentially shift the appeal of full exclusionary service contracts. Today’s buyers don’t necessarily want to purchase a full exclusionary service contract, but also don’t want to forfeit the opportunity to cover the technology that makes their daily driving experience more pleasurable. 

Similar to our society’s dependency on our smart phones, drivers have become increasingly dependent on the recent vehicle advancements. If these advancements should fail, or at minimum not function fully, it may result in diminished driver confidence. However, the failure of the feature does not always correlate to reduced mechanical operation of the vehicle.

Extreme Tech, a stated component vehicle service contract offered by National Automotive Experts, has been developed to cover a vehicle’s convenience features, including Bluetooth, back-up camera, proximity cruise control, park assist system, and more, has proven to be appealing to consumers, F&I producers, and dealers. 

CONSUMER BENEFIT: Today’s buyers resonate with tech-speak, more so than mechanical speak.  Consumers of newer vehicles can relate to not having their Bluetooth working properly more so than their transmission failing.  The thought of parallel parking without technology to assist is more alarming to a buyer then their alternator failing.  Also, the repairs (parts and labor) of these new features can add up quickly. Coverage provided by a service contract for these features can prove beneficial, alleviating the potential stress of having to come up with thousands of dollars for unanticipated repairs to these technology-based components. 

F&I PRODUCER BENEFIT: Previously, when a consumer declined an exclusionary service contract, producers were left to step-down to a drivetrain only VSC or drop the service contract all-together.  Now, producers can move to a second or third option on the menu, and still include a value-based VSC to the consumer.  This will add to the overall increase in VSC penetration and PVR to the producer and the department. 

DEALER BENEFIT:  Since an F&I producer can step a customer down from an exclusionary contract into Extreme Tech, the dealership will be able to hold more gross than if no VSC was sold at all. Statistics show customers who purchase VSC’s are more likely to return to their selling dealer for the all-important service work, which greatly increases the likelihood of them buying their next vehicle from the selling dealer – proving to be a win-win for the consumer, producer AND dealer.