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Pitch value of service contract to used buyers

June 3, 2016
Three-quarters of respondents to a recent online survey of vehicle purchasing said the next vehicle they buy won’t be new, but about one-third of them said it won’t be more than 2 years old.
And while price trumped every other purchase decision factor, knowing a vehicle will last 10 years was the second most important influencer, according to the survey by AutoMD, an online automotive repair resource designed to empower car owners with the best way to repair their vehicles.
The online survey of more than 1,000 vehicle owners noted that 59 percent of respondents plan to buy their next car within six months.
Of the respondents who said the cost of replacement parts would not be a factor in their vehicle purchase decision, more than half said that was because it did not occur to them or because they did not know where to look for the relevant information.
Consumers are open to learning about the value of a service contract, which gives dealers an opportunity to educate them.
Tim Meenan, executive director of the Service Contract Industry Council, suggests dealers say: "Rather than worry about the cost of replacement parts, consider an extended warranty," adding that a service contract brings relief if the car breaks down and that it’s included in the monthly payment.
A January report found that two-thirds of consumers do not have enough savings for a $500 car repair.
That statistic, plus knowing that most consumers are interested in at least learning more about service contracts, gives dealers and F&I managers an advantage.
If F&I managers asked consumers what they would do if their car broke down, based on that data, Meenan said a wise consumer would opt for a service contract.
Forty-three percent of new-vehicle buyers purchased a service contract in 2015, according to the National Automobile Dealers Association.
The majority of respondents to the AutoMD survey said they would shop for a vehicle that is about the same, or less than, the price of their current vehicle, although more than one-third were willing to pay more. And they would seek a "good deal," which they considered to be at or below invoice pricing.
Nearly half the respondents said their next vehicle likely would carry the same nameplate as their current car, while 29 percent said they would choose a different brand. Only 11 percent were interested in a hybrid or electric vehicle.