The numbers are in and consumers have spoken. There are three main reasons customers don’t protect themselves with service contract coverage. The good news is that dealers can easily clear these hurdles with the right program in place.
A study released this week by Pegasystems surveyed more than 1,000 consumers to understand whether or not they saw value in service contract coverage and what stops customers from purchasing a VSC with their vehicles.
Overall, the study found that 63% of customers do not have a service contract despite seeing the value in one. Why is this? Let’s dive into what stops customers from buying a VSC and how you can overcome those obstacles.
Cost. 35% of customer say they can’t afford a service contract, but if you talk about the small increase in monthly payment as compared to what a major repair could do to a tight monthly budget, it’s easy to paint the picture that allows you to ask which scenario is easier to withstand. With so many used car buyers on tight monthly budgets, a service contract’s monthly investment can easily pay off in the long run.
Not thinking they need one. 32% of customers think they’ll never encounter the need for service contract, but trends say otherwise. A simple question of how long the customer plans on owning the vehicle he or she is purchasing is just what you need to clear this hurdle. With the average length of ownership on the rise, chances are your customers will be in their vehicles for a long time. Used cars are inherently more likely to break down, especially as they approach and surpass 100,000 miles, making it more likely than ever before that a customer will need a VSC at some point during his or her ownership.
Lack of availability at the time of purchase. To solve for the 29% of customers who aren’t offered a VSC at the time of purchase, all you have to do is turn to the 300% rule. The first step is having a service contract provider that offers the product versatility – from both a vehicle and term perspective – that fits your inventory. Once that’s in place, it’s vital that you present 100% of your products to 100% of your customers 100% of the time. You’ll never bat 1.000, but you’ll get better at your presentation as you continue to get real-world practice and you’ll inevitably see the results in your F&I profits.