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9 February 2010 A dealer guide to selecting the right warranty provider

Providing or selling a warranty on a used car isn't solely about up-front profit - it is also a long-term strategy which may reap financial rewards for many years to come.

A warranty can be the catalyst for customer retention, that Holy Grail of car retailing which is one of the cornerstones of a successful dealer.

Research by Car Care Plan, for example, has shown that seven out of ten owners have their car serviced by the dealer from whom they purchased the vehicle, if it came with a warranty.

It is not only servicing, however, because a warranty is frequently the catalyst for the owner to use the dealer for non-warranty repairs, and indeed a replacement car.

Customer retention - not customer desertion

So, years down the line from providing a warranty with a car purchased by a new customer, that same customer may be discussing a replacement vehicle with the same sales executive.

Such a scenario, is unlikely, though, if the customer has had a negative warranty experience. If an owner justifiably believes he has been unfairly treated, customer retention can quickly become customer desertion.

Thus, a dealer's choice of warranty provider is a vital cog in the machine which generates profits.

To help ensure that the choice of warranty provider keeps the cog well oiled, a dealer should consider the following:

Competitive pricing doesn't necessarily mean cheap pricing. One doesn't automatically equate to the other.

Does the provider supply a monthly management report, which includes a full and detailed sales and claims analysis?

Does the provider supply quarterly formal reviews?

If you operate a manufacturer-backed warranty programme, does the provider have a team dedicated to that programme?

Does the provider carry out regular "health checks" on your dealership, which look at every aspect of your used car business, from stock turn to conversion rates? Such checks provide not only an insight into the profitability of your used car business, but also measure your successes.

Does the provider offer a dedicated account manager?

Does the provider offer staff training, so giving you the tools to sell profit-making warranty and GAP products?

Does the provider offer a direct mailing facility on behalf of either a manufacturer-backed warranty programme, or a dealer-branded product?

Is your warranty provider interested in increasing your profits, or more interested in increasing his own?

Answer these nine points to your satisfaction, and you may be well on the way to finding the best warranty provider for your dealership.

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