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March 14, 2003

USA: Independed extended warranty cover better for dealers than OEMs’ – survey

In the highly profitable area of extended warranty programmes, automotive dealerships are significantly more satisfied with independent service contract providers than OEM providers, according to the inaugural JD Power and Associates 2003 Dealer Service Contract Satisfaction Study (DSCS). The study measures dealer experience with the service, products and financial administration and fees of their primary service contract provider and is based on more than 5,000 responses from more than 3,300 US car dealers.

By bcusack

In the highly profitable area of extended warranty programmes, automotive dealerships are significantly more satisfied with independent service contract providers than OEM providers, according to the inaugural JD Power and Associates 2003 Dealer Service Contract Satisfaction Study (DSCS).

The study measures dealer experience with the service, products and financial administration and fees of their primary service contract provider and is based on more than 5,000 responses from more than 3,300 US car dealers.

The study finds that independent providers score significantly higher than OEM providers in all measures of satisfaction, and do so with more competitive rates than traditional service contract products offered by manufacturers. Independent providers receive an overall satisfaction index score of 791 — 72 points higher than the overall OEM provider score.

“Independent providers offer dealers more product choice and flexibility than OEM providers, and the representatives of independent providers are rated far superior to their OEM counterparts,” said JD Power senior director Scott Weitzman. “OEM providers must be aggressive in combating their more nimble independent competitors if they are to hold onto the large share of the market they currently control.”

The study also finds that high-volume dealers are more satisfied with their service contract provider than low-volume dealers. This gap in satisfaction is particularly evident among dealers using OEM providers.

One factor driving the greater satisfaction among high-volume dealers is the increased use of “participation” programmes, where dealers have higher earning potential by sharing in the risks of underwriting the contracts. Dealers using OEM providers overwhelmingly use direct programmes, where administration and underwriting are handled by the manufacturer. Dealers using independent providers use all types of programmes in nearly equal proportion, including self-insured, direct and participation programmes.

“Participation programmes are one of the key factors driving higher satisfaction among dealers using independent providers as these programmes yield greater profits,” said Weitzman.

CNA National ranks highest in dealer satisfaction with service contract providers, followed by First Extended Services Corporation and Toyota Extra Care, respectively.

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