Choosing the Right Vehicle Service Contract Company
We are a full service, consulting agency that puts our dealerships first. We are not tied to any administrator, nor are we direct employees of any warranty companies. Why does this matter? We will find the best solution for your dealership. Depending on the volume of service contracts you sell, the mileage of the vehicles, and your F&I goals.
When choosing a warranty company, there are many important questions to ask. For a car dealership, there are many different warranty companies to choose from. Price is a huge reason to choose one company over another. The dealer cost can vary dramatically depending on the program. Some programs are extremely conservative and expensive while other administrators are more competitively priced. Any decent warranty company will be fully insured and their prices are determined through due diligence performed by actuaries. With that being said, there are still many programs on the market and many dealerships choose to sell warranties from multiple companies so they can offer the best prices for their customers.
Some warranty companies take advantage of the gray areas such as preexisting conditions, maintenance intervals, etc. to avoid paying claims. Fortunately, their reputation will soon catch up to them legally and financially. Car dealerships have no desire to work with warranty companies that have unusually high percentages of claim denial. With a market full of options, warranty companies distinguish themselves by paying all the appropriate claims, offering competitive prices, and performing expedited service.
It is important that warranty companies make the claims process as convenient as possible for the customer. Fast and efficient service is crucial for consumer satisfaction. Most warranty companies will pay 100% of retail prices for parts and labor to fix a covered issue. They simply have requirements that service departments have the necessary licenses and certifications to work on a given vehicle. The claims process starts with a diagnosis, which is often followed by an independent surveyor’s analysis. The survey protects the warranty company from abuse by the service department for unnecessary repairs. Once the issue is diagnosed, the warranty company will determine if it is going to be covered. If it is covered, they will pay the service department for the repair. The customer is simply required to pay the deductible if there is one. Some service contracts even come with disappearing deductibles.
When choosing a warranty company, it is important to assess the financial strength of their insurance company. Five independent agencies—A.M. Best, Fitch, Kroll Bond Rating Agency (KBRA), Moody’s and Standard & Poor’s—rate the financial strength of insurance companies. Each has its own rating scale, its own rating standards, its own population of rated companies, and its own distribution of companies across its scale.