Best Practices in Selecting a High-Quality Vehicle Service Provider
by Alan Miller
Automobile dealers are constantly being approached by vendors of various products and services who want to do business with their dealership—for all the right or wrong reasons. Vehicle service contracts are one of these products and services, and they vary in range of coverage, quality and cost.
Although cost is always a concern for dealerships, selecting a vehicle service provider solely based on cost often means you are sacrificing a high level of service for very little gain.
“There is a price advantage with low-quality vehicle service contracts and there are usually a lot of headaches that goes with it,” says Rick Taylor, owner and principal of Dealer Based Services, Inc., based in Michigan. “The low quality shows when the customer doesn’t receive coverage or the service department has a problem getting through to the claims department, or getting claims authorized.”
To avoid these long-term or ongoing problems, select a high-quality vehicle service contract provider that will serve as a long-term partner, not a vendor that will make you want to change on a regular basis.
“So often people assume all vehicle service contract products are the same with the same financial backing and same management experience, but that is just not true,” says Johnny Garlich, owner and principal of Heart Dealer Financial Services, Inc., based in Missouri. “As an agent we do not want somebody in the business for the short term, we want somebody who is going to be there during the good and bad times.”
Selecting a high-quality vehicle service contract provider can increase a dealership’s bottom line through the finance and insurance department and create a more efficient experience for the service department during the claims process for customers.
Follow these best practices in selecting the right vehicle service contract provider and you will enjoy the benefits of not only a competent vendor, but a valued business partner as well.
Your Dealership, Their Top Priority
When considering vehicle service contract providers; focus on finding a company that will act as a true partner for your dealership’s best interests; not just a vendor.
“An easy fact to overlook is how much of F&I income goes directly to the bottom line,” says Lewis Mathews, Jr., owner and principal of Arkansas F&I, Inc. “Often at a dealership your net profit is the same as your F&I profit.”
A vendor who acts as a business partner views the relationship differently and incorporates your bottom line and customer service goals into the way they conduct business with you.
A Point of Reference
It may seem obvious, but checking references is an absolute necessity before entering a vendor relationship.
“When dealers review service contract vendors they should reach out to their service department managers and in addition to that, service managers should reach out to their peers and touch base because there is really nothing like a testimonial or referral from somebody who has used their product,” says Garlich.
Take a trip to their office, meet the staff and observe how they conduct business. Discover if the potential vendor-partner has any long-term relationships with recognized corporate brands and be sure to check the experience level of the senior leadership team.
Strength in Numbers
Financial strength of your provider is a must for a successful partnership—especially with the current economic climate. Research and track their financial history, specifically to ensure a high level of financial stability. This is especially important for products such as extended service contracts, which can obligate your dealership for up to seven or as many as 10 years.
“When you are choosing a financial partner you want one with a long track record of financial stability,” says Joel Kansanback, owner and principal of Automotive Development Group based in Minnesota. “I certainly will not choose a partner to sell for that would put my agency in jeopardy. The financial stability is important for me as an agent and the dealer, as well.”
Claim to Fame
The claims administration process is the one phase of your vehicle service contract provider’s operations that will affect you on a daily basis.
“The industry itself has many challenges in the claims administration area,” says Randy Crisorio, owner and principal of United Development Systems, Inc. based in Florida. “A high-quality service contract provider needs a seamless claims administration process without a lot of hassles.”
Once again obtaining a reference for the potential vehicle service contract provider is vital.
“Dealers should talk to other dealers who have used that vendor’s claim process, and with the service manager, as well,” says Garlich.
Make sure you know every step of the provider’s claim process, including options available for unusual claims. If the claims process is not completely amenable towards the customer; that may be your biggest sign that you are not dealing with a high-quality provider.
Also, be sure to review the actual service contract language to look for hidden ‘hooks’ or clauses that enable the provider to deny claims. Remember, the customer’s experience with the contract at the time of the claim will reflect directly on your dealership.
A System to Serve
Vehicle service contract providers will interact with different departments within your dealership—make sure they all are a top priority and there are no “favorites.” Some vendors are good with your F&I department but pay little attention to your service department, or vice versa.
“The service manager or director in a dealership should be involved in the review of proposed service contract programs,” says Crisorio. “Dealerships look for a lot more today than they did five, 10 or 15 years ago.”
The relationship must work for all key department managers in order to maintain the teamwork you have established within your organization.
Always ask yourself, “How will this vendor work with all of my departments involved with this vehicle service contract?”
Before you enter a relationship with your vehicle service contract provider, identify what training and support services they offer. Also inquire about their technological resources, if applicable. These variables have a direct impact with how easy it will be to conduct business with your vendor on a daily basis and how successful your dealership’s F&I department will be when offering the contracts to consumers.
“Having a team of professionals is really important,” says Garlich. “There has been an increased expectation of us to provide the recruiting, training and motivation to the F&I department. Years ago it was more product-oriented, but today it is more service-oriented.”
The Benefits of a True Partnership
Once you have experienced the relationship with your vehicle service contract provider for a couple of years, look back at how many forced conversations you had to have with them; and once a decision was made, was it an immediate solution to your problem, or did more changes have to occur? If you have selected the right provider, a decision should only have to be made once.
The needs of your dealership can change from year to year—does your provider have the flexibility to accommodate those needs?
“A service contract is just a piece of paper when you sell it,” says Taylor. “It becomes a service contract when they show up with the contract in their hand at the service department with a problem.”
While a short-term profit from an inexpensive service contract provider may help with your income today, following these best practices to select a high-quality service contract provider who is a true business partner will ensure the best for your tomorrow.
Alan Miller is senior vice president of sales for CNA National Warranty Corporation, headquartered in Scottsdale, Arizona. Miller has 25 years of automotive industry experience in sales and as a director of finance & insurance operations.
CNA National is recognized as a leader in the vehicle service contract industry. CNAN was the first service contract company recognized for “Highest Overall Dealer Satisfaction” by J.D. Power and Associates and has been named “Best Provider” in Auto Dealer Monthly’s Dealers’ Choice Awards for 14 consecutive years (2005-2010, 2012-2018 for service contracts and 2011-2013 and 2017 for reinsurance). CNAN has had the exclusive endorsement by the American International Automobile Dealers Association (AIADA) since 1995.
It is a wholly owned subsidiary of CNA, one of the nation’s oldest and largest insurers with $55 billion in assets.