Dealers Turning to Independents for Service Contracts

Car dealers sell more optional service contracts (such as extended warranties and mechanical-breakdown protection) when they utilize independent providers as opposed to plans offered from their respective factories. According to a study released by J.D. Power and Associates, dealers that use independents have sales rates of 32 percent to new-car buyers and 40 percent to used-car buyers. In contrast, dealers who use factory plans report 28 percent and 33 percent respectively.

From SEMA eNews

DIAMOND BAR, CA — Car dealers sell more optional service contracts (such as extended warranties and mechanical-breakdown protection) when they utilize independent providers as opposed to plans offered from their respective factories.

According to a study released by J.D. Power and Associates, dealers that use independents have sales rates of 32 percent to new-car buyers and 40 percent to used-car buyers. In contrast, dealers who use factory plans report 28 percent and 33 percent respectively.

The study offers insight into the dealer as the consumer, said Dennis Galbraith, senior director of research at J.D. Power and Associates.

“Despite the advantage of the financial strength behind factory-sponsored service contract programs, in nearly every case, overall dealer satisfaction is higher for independent providers of service contracts than it is for factory providers,” said Galbraith.

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