5 benefits of extended warranties to the dealership

October 5, 2017

The last installment in our “benefits of extended warranties” series discussed 5 benefits of extended warranties to the automotive customer. However, protection products like Mechanical Breakdown Protection (also known as an “extended warranty”) provide benefits to more than just the car buyer. Dealerships stand to gain significantly from offering extended warranties to their customers. If you’re unsure about why your dealership should offer protection products, consider the following five benefits of giving your customers a little more security.

  1. Retention and loyalty

    According to a recent study by Google, customers are more likely to be loyal to a dealership that provides excellent customer service and that expresses an interest in protecting them. Offering protection products that fit your customer’s lifestyle and needs will allow your customer to find value in a time of need. Think of a single parent stranded with kids by the side of a highway during a snowstorm. A good extended warranty will provide them with 24hr roadside assistance and cover the cost of overnight lodging and meals. By investing the time into showing your customers that you care, they’re more likely to remain loyal to your dealership and return for parts and service– business your customer could take elsewhere.

  2. Decrease in required goodwill

    If your dealership has ever offered a goodwill repair to a customer, then you know how problematic it could potentially be. An act of goodwill repair typically occurs because the dealership would like to foster a long-term loyal customer relationship. Often the warranty will have expired or the customer has overlooked coverage items. By presenting extended warranties that are right for your customer, your dealership can eliminate the number of goodwill repairs you may feel obligated to offer to maintain a good customer relationship.

  3. Improved relationships within the dealership

    Having a good relationship with your customer isn’t the only relationship that’ll benefit from offering a good extended warranty. By providing a quality protection product that suits your customer’s lifestyle, you’re helping ensure a relationship that’ll keep your customer coming back to your dealership for all their car ownership needs; routine service and maintenance repairs, trade-ins and even future car purchases. A satisfied customer that continuously returns to your dealership will ultimately help advance close working relationships between the sales, financial services and service departments.

  4. Improved customer satisfaction index (CSI)

    One of the most satisfying benefits of offering extended warranties is the improvement in your customer satisfaction index, or CSI. A good extended warranty helps to protect your customer’s budget from unexpected maintenance and repair costs. In a recent article discussing extended warranties, there are findings that conclude customers who purchase a branded or automaker backed extended warranty are substantially more satisfied than those who purchase coverage from a third party. As a result, the customer is more likely to respond favorably about your dealership when providing reviews.

  5. Increase in customer referrals

    A benefit you may not have already considered – customer referrals. By providing quality products to your customer, they are more likely to feel confident in their purchase, paving the way to a higher number of customer referrals. Positive emotions and experiences add value to those referred to your dealership, and make them more receptive to dealership offerings.

    Dealers, want to learn more about customer-focused finance and insurance products? LGM offers year-round, industry leading F&I automotive training and certification across Canada. Register now for one of our upcoming courses.