F&I Tips is a weekly informational video series brought to you by American Financial & Automotive Services, Inc.’s F&I University (FIU). Our associates bring decades of real-world experience in the automotive industry to this F&I Tips video series, as well as our five-day intensive F&I School at our corporate headquarters in The Woodlands, Texas.
In this video, Ritch Wheeler explains how having a customer specific approach when selling VSC can lead to more success.
Do you have a favorite service contract that you like to present? Maybe it’s one that you already know the price of for say, your top 4 or 5 vehicles that your dealership sells. Or maybe it’s one that matches the manufacturer’s power train warranty. Something like a 5-year 100,000-mile service contract to match a 5-year 100,000-mile powertrain warranty. Many of us do this over the course of our career. We get comfortable with a certain service contract typically because we have the cost memorized, and we get in the habit of always presenting this one first. However, I would caution you to be careful of this. Service contract needs vary widely from person to person. If we just play money ball, and look at the statistics, they tell us that we have a wide range of needs based on our different customers.
According to the Department of Transportation in 2018, the average customer drives 13,476 miles per year. But this can vary significantly from one customer to the next. For instance, men between the ages of 35 and 54 drive the most mileage covering almost 19,000 miles per year. While women in that same age group only drive just over 11,000 miles every year. It can also depend on what state you live in. Drivers in Colorado only logged an average of 13,500 miles per year, while drivers in Texas logged 16,500 miles per year, and Georgia drives had an average of 18,920 miles per year.
I think the take away from all these numbers is that we have to be very intentional about finding out what the driving habits are for that specific customer in front of us. This is why doing a good solid customer interview is so important. Even though we might have a 48-year-old male living in the state of Texas sitting in front of us, he might only drive 10,000 miles a year. We just don’t know unless we asked the question. Trying to present a blanket VSC for all consumers rarely satisfies any consumer. Nowadays more than ever people want a personalized transaction, and this holds true for vehicle service contracts as well. If we present a vehicle service contract that is too long, we might be asking the customer to pay more money than we have to, and we might be opening ourselves up to a future chargeback when the full term or mileage isn’t used. If we present a vehicle service contract that is too short the consumer might not see value. By finding out exactly what our customers trade cycle is, we give ourselves the best chance of finding the right service contract to present. This is Ritch Wheeler with American Financials’ F&I University, and that was your tip of the week.
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