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Cox Automotive: Service Contracts, Warranties Drive Service Retention

July 27, 2016

ATLANTA — A new study from Cox Automotive found that warranties and service contracts are keys to service retention. To realize that benefit, the study recommends that dealers allow car buyers to research service contracts before they step into their stores.

According to the firm’s Maintenance & Repair Study, 78% of owners who were at least partially covered by their vehicle’s factory warranty said they were very satisfied with their experience and always visit the dealership for service. Eighty-six percent of respondents who were at least partially covered by a service contract said they were “very satisfied” and always go to the dealership for service.

Under the heading “What Dealers Can Do,” the report cited findings from MakeMyDeal’s 2015 study. It showed that 71% of car shoppers polled would be more likely to purchase F&I products if they could research the products before making a purchase. It also showed that 58% of consumers would be more likely to purchase F&I products if dealer websites helped them better understand the value of the products.

“As a result, dealers should make F&I product education part of their online marketing strategy to in-market car shoppers,” Cox’s study recommended. “Also including online education about warranties and service agreements as part of that online strategy could be effective at driving sales of those products as well.”

The study’s main conclusion is that dealerships are leaving money on the table when it comes to maintenance and repair services, noting that only 30% of total service visits occur at a dealership. The reasons were value perception, awareness, customer experience, warranty/service contract expiration, and location and convenience.

Addressing the latter, the study found that 70% of respondent only travel 10 miles from their home to have their vehicles serviced, while another 40% limit their drive to five miles for service appointments.

However, the study also showed that consumers who are under some sort of warranty were twice as likely to travel more than 25 miles to have their vehicle serviced than those without some sort of coverage. Apart from warranties, the study also found that a personal introduction to the service department goes a long way toward getting customers to come back to the dealership for service and repairs.

Customers who were introduced to the service department at the time of purchase were 2.3 times more likely to get their vehicle service there than customers who were not introduced to the service department.  

For the study, Cox Automotive surveyed 4,455 vehicle owners between June 17, 2015 and July 7, 2015. In order to participate, respondents had to have maintenance or repair work performed on their vehicle by a third-party repair shop at least once in the past year.

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