Program gives dealers 2nd shot at service contract sales

Laura Clark Geist
Automotive News
December 10, 2007

MileOne Automotive used to take little notice when factory warranties expired for its new-vehicle customers. That inattention cost the private dealership group potential sales of extended warranties, the company says.

This year, MileOne teamed up with Carchex on a new program that markets extended warranties to customers who didn't buy service contracts with their new cars and trucks. Carchex, in suburban Baltimore, provides vehicle warranties and inspections.

"About 80 percent of consumers walk out without an extended warranty contract and never get remarketed again," said David Metter, chief marketing officer for MileOne, in Baltimore. The group operates 63 dealerships in Pennsylvania, Maryland, Virginia, North Carolina and Washington, D.C.

Metter said MileOne has sold more than 500 extended warranties under its new affiliation with Carchex.

"It's found business," Metter told Automotive News. "It's a win for us because it draws all those customers back into our service departments."

Here's how the program, called WarrantyCRM, works:

Owners who didn't buy extended warranties with their new vehicles get letters from MileOne dealerships when their cars or trucks rack up 33,000 to 44,000 miles or are several months from the end of their factory warranties.

The letters include a toll-free telephone number that puts customers in touch with a Carchex representative to discuss extended warranties. The service contracts have a Mile-One brand.

Nationwide, 150 dealerships have signed up for the new program, including MileOne stores. About 50 dealerships join each month, says Carchex CEO Jason Goldsmith.

Between 4 and 6 percent of customers who get the warranty letter contact the call center. Of them, about 30 percent buy an extended warranty, Goldsmith says.

In September, he says, 218 of 717 MileOne customers who called the toll-free number bought a service contract. Those customers came from 48 of MileOne's 63 stores, he says.

Carchex also can contact a dealership's customers by direct mail, voice mail and e-mail, Goldsmith says.

Dealers can get more information at www.dealers.carchex.com.

Goldsmith says that on an extended warranty for which a customer pays $2,000, the warranty administrator gets $1,200 and the dealership $200. Carchex keeps the rest to cover marketing costs, sales commissions, credit and financing fees, and overhead. What's left is profit.

The program's most popular extended warranty is for four or five years or 100,000 miles after factory coverage expires, Goldsmith says. The second most popular contract, he says, is for three years or 36,000 miles.