How to Price Your Prepaid Maintenance

How to Price Your Prepaid Maintenance

in Nov 24, 2020

Dealership prepaid maintenance pricing is so very important that it may be the single biggest factor between success and failure. Many F&I managers mark up their plans because they are commissioned on the gross of the aftermarket product sales. Over pricing for the sack of getting a few “home run” deals could be hurting your store in the long run.

While some consumers will purchase a plan, the typical consumer, when asked to pay $895 or more for three years of scheduled maintenance, simply adds up the cost of nine oil changes and a half dozen tire rotations and says, “Thanks, but no thanks!”

Successful PPMs are priced in such a way that even if a customer pulls out a calculator and – looking at the service menu – adds up the pricing for oil changes and tire rotations, the total represents at least an equal amount to what the F&I manager is charging them for the plan.

Dealers that understand the full purpose and potential of dealership prepaid maintenance price them below the actual retail value, recognizing that the forfeiture will make up the difference between sell and retail and that the big benefit comes from the customer retention aspect of the purchase.

Instead of trying to turn huge profits in the F&I office, these dealers focus on the long-term potential of each customer. When incremental upsell can average over $110 per “PPM” visit, dealers can quickly see RO numbers increase – as well as revenue. As we all know statistics have shown that customers will likely repurchase a future vehicle if the dealer can keep them returning to their service lane for regularly scheduled maintenance. With these two factors alone, even a simple LOF, rotation package sold at cost would more than pay for itself by the end of its contracted term.

The typical consumer recognizes that by purchasing a PPM, they are not only (in most regions) able to finance their first x-number of years of vehicle service and maintenance with their vehicle purchase, but they are able to lock in their maintenance at non-inflationary pricing.

With this type of program properly priced and executed, PPM sales penetrations can reach up to 50% or more, providing dealers opportunities to continually win over their customers, service visit after service visit.

Look at this example of how a properly priced PPM can make you millions.