The Easiest Money a Dealer Can Make

By Mike Bowers

As a fellow independent dealer I can certainly appreciate the challenges that have been presented to our industry over the past few years. With a lack of quality inventory, increasing competition from franchised dealers and the pricing stresses caused by the shift of our businesses toward the internet, making a solid profit can seem more difficult than ever. I don’t need to tell you more stories of seasoned dealers who have gone out of business over the last few years and I sincerely hope that the information I share with you in regards to selling service contracts can help to make sure that you (and I for that matter) are not among the dealers who have to give up the vocation we love.

Like me, you have probably been approached many times by someone trying to show you how to make more money selling service contracts. The sales trainer or service contract representative undoubtedly told you that their selling system would provide results and deliver an unbelievable boost to your bottom line. However, despite their slick and refined approach and impressive software and training material, there is one major flaw to every training system I have ever seen-- they lack relevance to independent dealers.

Those who service the new car and franchise side of the industry have very little working knowledge of what we do as independents. They have no idea the time and energy it takes to hunt down good inventory, manage relationships with your wholesale contacts, recondition and advertise your vehicles, relate to your customers, manage your sales staff, keep your books up to date and still make it home in time for some dinner and a little league game. I understand how difficult it is to handle those responsibilities and still find time to think about how you can increase your sales penetration when it comes to selling F+I products. The problem is we as independent dealers tend to spend so much time handling the day-to-day business of buying and selling cars that we fail to see the easiest opportunity to stay profitable under the current economic conditions.

The expression "easy money" may make you somewhat skeptical, but I want to tell you about a pile of easy money you may be missing completely. A few months ago, as my team and I were discussing how to sell more extended service contracts at John’s Great Cars, I was standing in the closet where we keep our paperwork for deals. We had been making some progress and getting our sales staff on board with the idea of selling service contracts consistently when I noticed a stack of unused service contracts sitting among the rest of our forms. I was enjoying the profit we had made on our last few deals and as I looked at the stack of contracts beside me I realized that there in that stack of paper was the easiest profit that any dealer can make. When you sell a service contract there are no cars to buy, no cars to transport, nothing extra to advertise, nothing to clean, nothing to fix and, most importantly, nothing to worry about after the sale.

Most of the work is already done in selling the car and if we, as independents, can commit to changing the culture in our stores, we can truly unlock the potential that is hidden in our dealerships. It sounds almost too simple, but I have found based on my own experience that the skills and processes needed to sell service contracts are no different than those we already employ selling cars. Sure, it is effective for sales trainers and some warranty companies to convince you that you need an elaborate or tech heavy approach to selling F+I products. They want to sell you on their services and, in the case of trainers and consultants, justify the fees they charge. There is no magic and there are no secrets. All that is required is for you, the decision maker in your dealership, to get excited about the easiest money you can make and take the time to pass that excitement on to your employees.

I can go on at length about what I feel is the right way for independents to sell service contracts, but I realize that each situation and dealership is unique. What works at our store may not exactly fit yours and you may have more or less resources available to put towards your effort. If you are ready to make some seriously easy money the one constant is that you must commit to giving every customer the opportunity to buy your service contracts. I can’t tell you how many customers left our store over the last 20 years without even knowing the options that were available and I hate to think of the mountain of profit that walked away with them. Since our commitment to selling contracts began in earnest, we have sold contracts to customers who I never thought would buy, including several mechanics who know what it costs to fix a car in today’s market. Now I venture no guesses about who will buy a service contract and work hard to make sure that every customer is presented with every option every time.

The idea of selling service contracts tends to raise some questions among independent dealers and especially their sales people. No one wants to jeopardize a sale by trying to add another product to the mix, most sales people do not want to learn something new, and some people just don’t believe in warranties as a matter of principle. I understand the objections and have dealt with them with our sales staff as well. But the decision to focus on selling more service contracts should not be left to our sales people in a sort of democratic vote. I firmly believe that when we sell cars we are not simply closing another deal, but building a business relationship with our customers. As such, we need to protect them from the inevitable failures that occur with every vehicle. This thought is what really got me excited as we began to sell more service contracts. Not only were we instantly more profitable, but we were insulated from many of the headaches that come along with selling used cars. Our business may change on a month- to-month basis, but I have done this long enough to know that one thing remains constant – cars break and our customers like us a lot more when the repair is covered.

I hope you can get excited about the prospect of being successful selling service contracts and begin to work on the best way for your dealership to give every customer your best effort. At John’s Great Cars, we have dedicated two people on our sales staff to handle our F+I and now our sales staff turns over every customer for a separate presentation on the options available to protect their new vehicle. We have been very successful with this process, but even if you have only one or two people at your building, there are ways to ensure that every customer is given a proper opportunity to buy. You wouldn’t let a customer walk away who might buy a car, and you shouldn’t let one get away who might buy a service contract. The money is just too easy!

Mike Bowers is a co-owner of John’s Great Cars, Reading, Pa. His dealership began partnering with Preferred Warranties in 1998 and has sold nearly 5,000 PWI service contracts to date. You can reach Mike at (484)663-0997 or by email at info@johnsgreatcars.com.