Prepaid Maintenance Programs Providing Everyone the “Win”

in Dec 20, 2021

Everyone appreciates getting more value out of an investment than they initially put in. It’s not very often, however, that both the dealer and the customer feel they’ve profited as they see fit when the customer leaves the dealership. One party usually feels that they could have – or should have – gotten “more”.

Imagine a scenario where the customer drives off in their new car knowing they received the best value for their money and anticipate a great relationship with their dealership going forward. The dealer leaves the sale knowing their customer will return for future services, and hopefully, vehicle purchases. Consider this a “win, win” scenario, where the dealer and the customer feel more than satisfied. This describes the functionality and benefit of today’s technology-driven, dealer-controlled prepaid maintenance programs, giving everyone involved tangible results.

There is no question that PPMs keep customers returning to your service department, and create overall better auto dealer customer retention. Even better, each PPM visit creates upsell opportunities and the statistics speak for themselves: customers who use a dealer’s repair facilities are 17 times more likely to purchase their next vehicle from that dealer. Maintaining a greater percentage of customers returning to your service department can bring huge increases to your service bottom line.

You’re In Control

Given the prices and administration of traditional plans, dealers have experienced challenges with maintaining profitably. New PPM technology removes these stressors by placing the administration, management, and reserve functions in the hands of the dealer. This permits key functions and processes, such as redemption management, registration, service claims and premium submission to be carried out in-house. Through the dealership management system (DMS) and web-based software, PPMs are more affordable and more effective.

Software-driven PPM programs are a great leveler. Their dealership fees are three to four times less than traditional third party-based programs and eliminate usual “seeding fees” charged for setting up and maintaining the PPM reserve account (these fees tend to average $10,000 to $14,000 for every $1 million in reserve).

Today’s PPMs give the dealer complete daily control over how money is reported, tracked, and spent. Earned reserve or plan forfeiture amounts are realized immediately, and there is no portioning out to an outside administration company. Every plan will experience forfeiture, resulting from a customer terminating the plan early or not using their plan. For most traditional PPMs, the third-party administrator holds this dealer-funded reserve, and from there often takes up to 60% of the value of cancelled services as part of the fee structure. In contrast, modern plans enable the dealer to process forfeiture through the general accounting ledger in the DMS.

Cater Your Plans to Your Customers

Self-administered, self-managed plans are more appealing to customers – particularly those buying mainline domestic and import brands, who seek value in all they purchase, whether that be automobile services or their groceries. This is all due to technology-driven plans providing dealers with the ability to customize what their customers are offered in the PPMs, resulting in a plan with benefits ranging from discounted prepaid LOF to tire rotation and fluid services. Plans that cater to the local demographic will be more appealing, making their presentation and sale in the F&I office or service lane profitable and successful for the dealership.

It is today’s technology- driven PPM’s ability to retain a customer’s business and create upsell opportunities that make them worth everyone’s time and money. These programs can triple the likelihood of the customer continually returning for service – a massive increase from the 18 to 20 percent of customers who normally return due to a PPM’s incentive.

By transforming prepaid maintenance work into genuine service needs (your dealership does insist on providing every customer that enters the store a free, no-obligation vehicle inspection, right?) the extra retail parts and labor can produce healthy surplus of business. Several dealers report the ability to glean an additional $150 to $350 of up-sold retail business per RO as a result!

Technology-driven PPMs managed and controlled by you are the key to a more profitable and successful business. Take a further look into how to make one million dollars in only one year with a properly designed dealership prepaid maintenance program.