Market Analysis and Benchmarking of OEM Service and Maintenance Contracts in North America, 2018–2025

Market Analysis and Benchmarking of OEM Service and Maintenance Contracts in North America, 2018–2025

Finance and Insurance Products Will Account for 35% of Gross Dealership Profit by 2025

RELEASE DATE
17-Jun-2019
REGION
North America
Research Code: K31C-01-00-00-00
SKU: AU01865-NA-MR_23286

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Description

This report covers the automotive service and maintenance contract market in terms of volume (in million units) and value ($ billion) across North America. The key products covered in the study include vehicle service contracts, prepaid maintenance plans, tire and wheel protection and appearance protection. It discusses the unit shipments, revenue forecast, distribution ecosystem, digitization and the future aspects of finance and insurance (F&I) products. The base year for the analysis is 2018 and the forecast period is from 2018 to 2025.

Marginal growth in new vehicle sales and compressed dealership profitability makes them depend on auto ancillary components, such as finance and insurance (F&I) products to ensure sustainable and incremental profitability. Protection against price inflations, one-time investment towards the service and maintenance requirements of the vehicles attracts customers towards F&I products. By bringing the customer back to the dealership for vehicle service requirements. The customer develops a positive image towards OEMs and influences future purchase decisions. This increases the revenue potential for dealerships through parts and service sales. As most F&I products are paid up front, these packages can help improve cash flow and provide incremental profitability to the OEMs.

In traditional auto retailing, F&I products are introduced in the final stages of the purchase cycle resulting in pressurizing the customer to make a buying decision. The dealer-centric approach does not address the actual needs of customers. Consumers are demanding a hassle-free online purchase experience similar to non-automotive sectors. To remain relevant, it is imperative that OEMs and dealership develop a consumer lifecycle engagement plan and adopt an omnichannel, customer-centric sales strategy. The study addresses the bottleneck involved in the F&I sales process and also discusses the digital solutions that address these challenges.

Key Features

The aim of this research service is to provide an overview of the automotive service and maintenance contract market, including market size and structure.

  • To analyze vehicle sales, average miles traveled and average maintenance and service costs and to understand the demand factors driving the automotive service and maintenance contract market in North America
  • To estimate the total market opportunity based on a top-down analysis of vehicles in operation, replacement rates, and available pricing data
  • To provide insight into service offerings, distribution ecosystem, and market developments that will influence the evolution of service contracts and the aftermarket

Key Issues Addressed

  • What are the factors influencing the adoption of service and maintenance contracts in North America? What is the future of these F&I products in the short to medium term?
  • What is the size of the service and maintenance contracts in 2018? What is the impact on dealership profitability?
  • What are the service offerings that are covered under each F&I product? How are they expected to evolve?
  • What is the scope of digitization and future growth opportunities?

Author: Anuj Monga

Table of Contents

Key Findings

Service and Maintenance Contract Ecosystem

List of Companies in the Service and Maintenance Contract Ecosystem

Research Scope and Definitions

Research Aim and Objectives

Key Questions this Study will Answer

Research Background

Research Methodology

Service and Maintenance Contracts Scope

Service and Maintenance Contracts—Definitions

Service and Maintenance Contracts—Strategic Advantages

Customer Retention Trends—A Critical Issue for Dealers and OEMs

F&I Profitability—Offset for Declining Sales and Margins

F&I Profitability—Used Vehicle Sales

Parts Sales—Higher Share Needed in Low Growth Ecosystem

Vehicle Service Contracts—Overview

Components Covered Under Vehicle Service Contract (VSC)

Contracts and Revenue Forecast—Vehicle Service Contracts

Vehicle Service Contract—Penetration Rates in New Vehicles

Prepaid Maintenance Contracts—Overview

Components Covered Under Prepaid Maintenance Plan (PMP)

Maintenance Plan—Package Types by OEMs

Maintenance Plan—Package Types by OEMs (continued)

Contracts and Revenue Forecast—Prepaid Maintenance Contracts

Appearance Protection Plans—Overview

Services Covered Under Appearance Protection Plan (APP)

Contracts and Revenue Forecast—Appearance Protection Plan

Tire and Wheel Protection Plans—Overview

Components Covered Under Tire and Wheel Protection Plan (TWP)

Contracts and Revenue Forecast—Tire and Wheel Protection (TWP)

Traditional Approach to Automotive Retail

Digitization of the F&I Process

Elements of Digital F&I

Case Study—Digitizing the In-store F&I Experience (docuPAD)

Future of Maintenance Contracts

Growth Opportunity

Strategic Imperatives for Success and Growth

The Last Word—3 Big Predictions

Legal Disclaimer

Market Engineering Methodology

List of Exhibits

List of Exhibits (continued)

List of Exhibits (continued)

Related Research
This report covers the automotive service and maintenance contract market in terms of volume (in million units) and value ($ billion) across North America. The key products covered in the study include vehicle service contracts, prepaid maintenance plans, tire and wheel protection and appearance protection. It discusses the unit shipments, revenue forecast, distribution ecosystem, digitization and the future aspects of finance and insurance (F&I) products. The base year for the analysis is 2018 and the forecast period is from 2018 to 2025. Marginal growth in new vehicle sales and compressed dealership profitability makes them depend on auto ancillary components, such as finance and insurance (F&I) products to ensure sustainable and incremental profitability. Protection against price inflations, one-time investment towards the service and maintenance requirements of the vehicles attracts customers towards F&I products. By bringing the customer back to the dealership for vehicle service requirements. The customer develops a positive image towards OEMs and influences future purchase decisions. This increases the revenue potential for dealerships through parts and service sales. As most F&I products are paid up front, these packages can help improve cash flow and provide incremental profitability to the OEMs. In traditional auto retailing, F&I products are introduced in the final stages of the purchase cycle resulting in pressurizing the customer to make a buying decision. The dealer-centric approach does not address the actual needs of customers. Consumers are demanding a hassle-free online purchase experience similar to non-automotive sectors. To remain relevant, it is imperative that OEMs and dealership develop a consumer lifecycle engagement plan and adopt an omnichannel, customer-centric sales strategy. The study addresses the bottleneck involved in the F&I sales process and also discusses the digital solutions that address these challenges.--BEGIN PROMO--

Key Features

The aim of this research service is to provide an overview of the automotive service and maintenance contract market, including market size and structure.

  • To analyze vehicle sales, average miles traveled and average maintenance and service costs and to understand the demand factors driving the automotive service and maintenance contract market in North America
  • To estimate the total market opportunity based on a top-down analysis of vehicles in operation, replacement rates, and available pricing data
  • To provide insight into service offerings, distribution ecosystem, and market developments that will influence the evolution of service contracts and the aftermarket

Key Issues Addressed

  • What are the factors influencing the adoption of service and maintenance contracts in North America? What is the future of these F&I products in the short to medium term?
  • What is the size of the service and maintenance contracts in 2018? What is the impact on dealership profitability?
  • What are the service offerings that are covered under each F&I product? How are they expected to evolve?
  • What is the scope of digitization and future growth opportunities?

Author: Anuj Monga

More Information
No Index No
Podcast No
Author Anuj Monga
Industries Automotive
WIP Number K31C-01-00-00-00
Is Prebook No
GPS Codes 9800-A6,9801-A6,9AF6-A6