Fixed Ops Journal - April 2018 - F32

FIXED OPS JOURNAL

FIXED OPS JOURNAL
ILLUSTRATION

PAID
IN
ADVANCE
Amid automaker maintenance cutbacks,



dealerships ramp up sales of prepaid plans

JENNY KING

foj@autonews.com

s automakers reduce or even eliminate free maintenance for new vehicles, dealerships are stepping up
their promotions of prepaid plans
for routine services such as oil changes.
The plans offer basic services at a discount
to encourage customers to keep up with
scheduled maintenance, making major repairs less likely. Dealers say such plans help
retain customers, boost fixed operations profits and stimulate repeat service sales.
As of last year, 1 out of 9 new-vehicle buyers,
or 11 percent, purchased a prepaid maintenance plan, the National Automobile Dealers
Association reports. That take rate rose steadily from 3.3 percent in 2009.
Prepaid plans, which often are available to
used-vehicle owners as well, typically include
oil changes, tire rotations and multipoint inspections. They take vehicle age and odometer miles into account.
As a rule, the more extensive the plan, the
higher the price. Automakers, independent
vendors and individual dealerships all market
prepaid plans.
Kelley O'Reilly, a marketing professor at
Western Michigan University, says owners
"are not proactively scheduling their vehicle's
maintenance."
"Most consumers will not be open to pre-

PAGE 32

APRIL 2018

Pay upfront
The share of new-vehicle buyers who
purchased a prepaid maintenance plan
from a franchised dealership has risen
steadily in recent years.
2009
2010
2011
2012

3.3%
3.6%
4.3%
5.0%

Source: National Automobile
Dealers Association

2013
2014
2015
2016
2017

6.7%
8.0%
10.5%
10.7%
11.2%

paid maintenance programs unless it is something that they don't have to see," such as a
plan whose costs are included in vehicle loan
payments, O'Reilly told Fixed Ops Journal.

Automaker cutbacks
Some automakers and brands, such as Ford,
Nissan and Volkswagen, no longer include
free scheduled maintenance with the purchase of a new vehicle. Others, such as Toyota,
Chevrolet, Volvo and BMW, still do.
VW of America dropped its included maintenance plan several years ago, says spokeswoman Jessica Anderson. "We looked at our
volume competitors and, for the most part,
they weren't offering it," she says.
BMW of North America has trimmed its Ultimate Care program of free maintenance to

the first three years or 36,000 miles of ownership from four years or 50,000 miles. Owners
of new and certified used vehicles can buy as
many as four additional years of Ultimate
Care Plus coverage, starting at $600 a year.
In October, Wallace Imports of Bristol, a
Subaru-Kia-VW dealership in Tennessee, began selling prepaid maintenance plans bearing the dealership's name.
Before that, says TC Baker, the dealership's
general sales manager, customers who bought
prepaid plans offered by the automakers did
not use them fully. The providers of those
plans pocketed the "spoilage," Baker says.
The dealership developed its own prepaid
program, Wallace Advantage, with the help of
Fidelis PPM, a plan provider in Scottsdale,
Ariz.
The Wallace plan enables customers to pay
in advance for maintenance outlined in their
owner's manuals for vehicles with 36,000 to
60,000 miles on the odometer.
Advantage plans cost $400 to $995. Baker
says the dealership's plans "sell at three times
the rate of the OEM plans" but did not provide
specific figures. The dealership is developing
a separate prepaid maintenance plan for used
vehicles, he adds.

Return on investment
Even modest sales of prepaid plans add to
the profitability of a dealership's fixed operations, says Fidelis President Ryan Williams. A
$19.95 oil change typically produces an
see PREPAID, Page 33

Table of Contents for the Digital Edition of Fixed Ops Journal - April 2018