Many dealerships allow their finance managers to price prepaid maintenance programs (PPMs) high enough to shatter success from the start. They overprice PPMs thinking that the real benefit comes from the plan profit and forfeiture. While some new buyers will take the bait, the typical consumer, when asked to pay $895 for three years of scheduled maintenance, simply adds up the cost of nine or ten oil changes and a half dozen tire rotations and says, “Thanks, but no thanks!”
Successful PPMs are priced in such a way that even if a customer pulls out a calculator and – looking at the service menu – adds up the pricing for oil changes and tire rotations, the total represents at least an equal amount to what the F&I manager is charging them for the PPM.
Dealers that understand the full purpose and potential of PPMs price them well below the actual retail value. Instead of trying to turn huge profits in the F&I office, these dealers focus on the long-term potential of each customer. When incremental upsell can average over $90 per “PPM” visit, dealers can quickly see RO numbers increase – as well as revenue. Statistics also show that up to 83% of customers will repurchase a future vehicle if the dealer can keep them returning to their service lane for regularly scheduled maintenance. With these two factors alone, even a PPM given away for free would more than pay for itself by the end of its contracted term.
The typical consumer recognizes that by purchasing a PPM, they are not only (in most regions) able to finance their first x-number of years of vehicle service and maintenance with their vehicle purchase, but they are able to lock in their maintenance at non-inflationary pricing.
With this type of program properly priced and executed, PPM sales penetrations can reach up to 50% or more, providing dealers opportunities to continually win over their customers, service visit after service visit.
Are your customers seeing value in your PPM? Is the price right?
Many dealers mistakenly think PPMs are only successful when sold in F&I. Have you tried selling them through your service lane?
Would you buy your dealership’s PPM?