Tires for Life??

[Michael White]

Many dealers in the south seem to be doing it. Most of them are foreign cars as I understand. Am interested in the program and what other fixed ops people have to say about it.How is the program paid for, How do you deal with tires that are $150 each? If money is being set aside, how are you dealing with the tax stuff? On the email info from WDS, there is a add about doing tires for life and putting money off shore. Is it really this big a deal??

[robc]

I can't imagine it is that much of an issue money-wise, but I guess that can vary tremendously between dealers. Figure annual reserves of $35k - $40k. I began to research tires for life early this year and then I heard Lee Harkins touting it in his NADA speech this year so I kind of put it on hold.

Youre right mostly south, mostly imports. In fact, Toyota stores account for a third of the dealerships Ive surveyed offering tires for life. There are stores that will exclude the expense models. For instance, many Nissan stores will exclude 350Zs. So that might be a way to get around the big dollar tires.

For those wondering the simple premise is as long as a customer completes every required service then they are eligible for free tires for life. But there are some strong rules that apply.

First, most dealer programs only covers the cost of the tires. So installation labor, weights, stems, disposal, etc are the customers responsibility. In many programs Ive seen the customer is also required to get a four-wheel alignment at the time of tire replacement. (plus the standard exclusions like damage due to misuse, road hazard, under inflation, etc.)

Which leads us to our second issue, the required service in many of the domestic make plans Ive looked at have been dealer-recommended and not the factory basics (again Toyota and Nissan stores are by and large the exception here only requiring factory plus FEA). In some cases, Ive seen annual FEAs, engine/coolant/trans/injector flush, and an acceleration of services to eligible for the plan. As always, thats a dealerships decision but one to be aware of when comparing plans or programs (read the fine print of what the dealer is offering).

I guess the point is can you make enough profit in the services from zero to 30K to pay for the tires (I am guessing that in most cases new tires are required around 35K for the average customer.)

On that point, most service managers Ive talked to the actual instance of 100% completion is low. I havent had a good number on overall customer participation up to and including the 15K, but I would suspect it is lower than 50% (imports may vary). Id want to know this number for my dealership going in. Also I have found a greater than 40% defection rate once they hit the 30K service. So for those few customers who did diligently do all the maintenance will bail once they get to the big nut.

Many stores I talked to are holding out $50 from each sale for a reserve of tire money. That is an educated guess because I don't know if anyone has a track record of loss yet.

Oh and one more thing and this might be a relationship to state safety laws but I see tread depth for replacements ranging from 5/32 to 2/32.

Besides tires, I hear free batteries for life, free brakes for life, and the old tried and true free LOF for life.


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

[This message has been edited by robc (edited 05-28-2003).]