Warranties

[Fixedopsmgr]

My dealer has read somewhere that a dealer is giving lifetime powertrain warranties to all customers that purchase vehicles from this particular dealer. The warranty only applies if the customer returns to the selling dealer and has all of factory recommended maintenance performed. The warranty is the same as any factory powertrain warranty except that it is valid forever as long as they own the car. The idea is to increase customer retention. His main idea is that is a good selling tool for the sales department. I am wondering if anyone uses such an idea, and what problems there have been.

Thanks

[This message has been edited by Fixedopsmgr (edited 01-16-2001).]

[Libbye]

We have a lube lane and give all lease customers lifetime LOF for the life of the lease, retail customers get discount coupons so they come back to us - we basically use the lube lane as a customer retention tool so we don't make money on the lane but we do make money when the customers come back!

[bassslap5]

I dont think that giving lifetime powertrain warranties is a good idea. How does that help the service dept? What we do is we have our own in house extended warranty and prepaid maintenance programs that customers purchase when they purchase their vehicles. This seems to work real well for us.
LDeSousa

[Fixedopsmgr]

The idea is that for the warranty to be valid the customer must return to the dealer for their maintenance work. But how would you define it? Would you use the factory guidelines or dealer defined menu's? What if they go 8,000 miles between oil changes and it should have been done at 5,000. Where would you draw the line? I think something like this could be a great selling tool for sales, but this seems to have a few problems with it!

[jwise67]

I don't see where the service dept would benifit from the lifetime powertrain warranties. I would charge the sales dept for the repairs done to a vehicle. I would discount the repairs out. I wouldn't do it for nothing. You have to pay a tech for there work.

[robc]

I've seen a few stores do it, but I've never been positive what it exactly added to their bottom line. As someone said, several oil vendors will offer a similar program is you use their oil.

The point being lost here is that it is usually an empty promise because (1) most new vehicle buyers don't keep a car forever, and (2) most won't get every service done. Out of those who actually keep their vehicle 50,000+ miles, and have regular servicing, it's still a small percentage that will run into trouble (depending the makes you sell).

If it worked as designed it would make money. If you were able to retain 100% of your customers, and they did even 100% of the factory's recommended servicing then you'd probably come out ahead of the game at the end.

But again, why would you want to take that risk when QuakerState or someone else is willing to do it for you. (I think Wynn's still has some programs as well.)

The bottom line is, really how many of your customers would be swayed by this promise of a life-time warranty to make sure they got back in to do the service? You know your customers better than anyone to be able to answer that.

The other point, is on the requirements. Of the programs I have seen they required that the customer follow the manufacturer's severe use schedule and have the service performed within 1,500 miles (45-days) of the date. If you have something that is recommended above the manufacturer's recommendations then that's your job to sell on the drive - don't ever represent it in any manner as "required" because you lose creditibility.



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** Rob, Editor WD&S **
Help is only a message post away!
robc@dealersedge.com

[warr_wiz]

Here's my feelings on the "lifetime powertrain warranty" topic. I think this could be a great tool for all departments if run correctly. Maybe add a little bit into the vehicle price, (it doesn't have to be a whole lot), and put it into an account used exclusively for the warranty. The money collected would surely cover all costs, or at the least a good portion of the cost, for any repairs needed. Let's say the money did not cover the cost. I would split the cost between sales, service, and parts. All of these departments would benefit. First...sales would benefit because the customer would make the next purchase knowing he can get a free warranty. Service and parts would get the P.M. work and have a returning customer for life. And of course, people start hearing about free warranties being given away, I would think showroom traffic would increase. I think it could be a great benefit to a dealership but as I said it would need to be run correctly.

[fburrows]

If I were to consider such a program I would do it with a free oil company warranty with someone like Quaker State but also reserve something like $50 a car to cover cases where the warranty company turned down a claim because the customer missed a required oil change by 50 miles or any other instance where you think the customer deserved the free repair.
I often think these are just gimmicks to replace a quality service experience. I think your time would be better spent on giving the customer the best service you can and leave the gimmicks to others.

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Frank Burrows
Automotive Business Solutions
frank@autobusiness.org

[SJReinarts]

When these vehicles come back for warranty work with 100k miles on them,at what labor rate do you bill it out at ? Factory time or Chilton time. The service dept.takes the hit if you use factory time. The techs need to be paid fairly.

[Fixedopsmgr]

The way it would work is that the tech would get chilton time for the repair and the be billed at retail labor rate.

I would have to agree with rob though about the empty promise theory. There has to be a perceived value.

Thanks for the input.