80,000-mile warranty gets the deal done

BEST PRACTICES

As factory cuts back on powertrain coverage, store offers a boost

Cunningham’s extended powertrain service contract costs the store $ 299 per vehicle, which is rolled into the selling price.

Powertrain pump-up

Cunningham Chrysler-Dodge-Jeep of Edinboro in Pennsylvania offers extended powertrain service contracts as standard on almost all of its new and used cars. Doing so has especially helped to close used-vehicle sales.

Cunningham Chrysler-Dodge-Jeep of Edinboro has a secret weapon in closing the deal on new and used cars: an extended powertrain service contract that is offered on almost all the vehicles the Pennsylvania store sells, covering the powertrain for up to 80,000 miles.

The service contract has been most effective in the used-car department, where sales are up about 30 percent since 2012, said Mike Cuzzola, Cunningham’s general manager. Cunningham started the program in 2013.

This year, he said, the store is on track to sell about 900 new and used vehicles, and the split is 50-50.

The service contract costs the store $ 299 per vehicle, which is rolled into the selling price. It has been key to cinching the deal for customers who are on the fence with a purchase, Cuzzola said.

On new cars, Cuzzola explained, the additional service contract begins when the factory warranty expires. On used cars, it gives customers peace of mind that they won’t have to face a car payment and a repair bill if something expensive breaks, he added.

The service contract offer comes as Fiat Chrysler is trimming its warranty coverage. For 2016, the automaker has reduced the powertrain coverage in its warranties to 5 years/60,000 miles on most of its vehicles, from 5 years/100,000 miles previously. FCA also offers 3-year/36,000-mile bumper-to-bumper coverage on most of its new vehicles.

With 80,000 miles of powertrain coverage on new cars, most customers won’t see a repair bill, as most don’t keep a vehicle long enough to accumulate that many miles. But if something does break, the most they will pay is the $ 200 deductible.

“It is so competitive in new and used. The warranty also includes a loaner car. It just gives customers peace of mind.”

Bud Peirson
Cunningham Chrysler-Dodge-Jeep of Edinboro

The dealership excludes some vehicles from the offer. Clean, older used vehicles with higher miles get a 3-month/3,000-mile warranty. Some vehicles, known for being high maintenance or from obscure brands, are not offered with a warranty.

To qualify for the service contract, a used vehicle has to be a 2008 model or newer and have fewer than 75,000 miles.

“It is so competitive in new and used,” said Bud Peirson, a used-car salesman at the dealership south of Erie, Pa. “The warranty also includes a loaner car. It just gives customers peace of mind.”

The service contract covers everything except regular wear items such as lights, windshield wiper blades and brake pads. Claims have been few, Cuzzola said. If the third-party company that supplies the contract won’t honor a claim, Cunningham does, he added, so that customers won’t be inconvenienced.

Perhaps twice a year, a vehicle covered under the service contract suffers a major failure requiring the replacement of an engine, transmission or transfer case, he said.

When a vehicle is bought at an auction or traded in, it is given a thorough inspection to ensure it has not been abused and is not in need of major repairs. Once deemed in good condition, Cuzzola said, a vehicle is offered with the service contract, which the dealership touts in its ads.

The service contract helps the store get more for its vehicles, as vehicles that are certified have the powertrain offer. “A certified vehicle has more value than a noncertified,” Cuzzola said, citing data from the National Automobile Dealers Association that puts the difference at “between $ 800 and $ 1,300 depending on the vehicle. So, there’s more value for sure.”

The service contract, Peirson said, also helps salesmen to establish a good rapport with customers. “I’ve been doing this 27 years. A sale is made when you first meet the customer,” he said. “If the customer gets a good first impression from a salesperson, that goes a long way in them wanting to make the purchase.”

You can reach Richard Truett at rtruett@crain.com.


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