What is a vehicle service contract? Everything your dealership needs to know.

Raeleigh Lewandowski
September 1, 2023

As highlighted by Colonnade Advisors, vehicle service contracts play a pivotal role in dealerships, contributing to 25% of dealerships' gross profit. This upward trajectory is anticipated to persist due to the aging of cars and the subsequent rise in repair costs. Therefore, it becomes imperative for F&I managers to grasp the essence of "What is a vehicle service contract?" Equipping dealerships with this knowledge, F&I managers can effectively present these contracts as solutions that meet customer needs. Simultaneously satisfying individual preferences and aligning with the organizational objectives of the dealership, your dealership can reap the benefits.

What is a vehicle service contract?

A vehicle service contract, also known as VSC, presents an elective payment plan, offering coverage for repairs beyond warranty limitations. Typically F&I managers present these contracts as the final step in vehicle sales, VSC contracts provide added peace of mind to buyers. By safeguarding against expenses not covered under warranties, vehicle service contracts prove valuable additions, ensuring comprehensive protection for customers' prized assets.

How dealerships sell vehicle service contracts

Dealerships effectively market vehicle service contracts to customers through a strategic combination of personalized communication and menu presentation. Firstly, well-trained sales representatives engage prospective buyers with detailed explanations of the contract's benefits, highlighting enhanced vehicle protection and long-term cost savings. They tailor the pitch to address individual concerns and emphasize the contract's ability to provide peace of mind. By utilizing persuasive techniques, such as menu presentation and in-person communication, dealerships showcase the importance of extended coverage for unforeseen repairs. The professionalism of a presentation menu can also build trust between the F&I manager and the customer by displaying full visibility of protection and rates.

Why are vehicle service contracts important?

Vehicle service contracts can help dealerships enjoy these benefits:

Increased Profit Margins

Statistics indicate that the most significant potential for vehicle service contracts arises after the customer's initial vehicle purchase. This opportunity is expected to grow drastically due to rising rates on new vehicles, an increase in used-car sales, and the expiration of warranties. To capitalize on the opportunity of vehicle sale trends, dealerships can strategically implement eRating and eContracting solutions. By customizing protection rates to cater to the specific needs of buyers, dealerships can enhance customer satisfaction and long-term loyalty. This fosters a win-win scenario for both parties involved.

Customer Retention

By optimizing vehicle service contract selling to customers, dealerships can significantly boost customer retention rates. Offering top-notch VSC options builds buyer loyalty, encouraging them to return for repeat servicing. Considering affordability and comprehensive vehicle protection, resonates with buyers, enhancing the likelihood of their continued patronage.

Better Brand Image

Vehicle service contracts play a pivotal role in enticing buyers to revisit dealerships for ongoing services, aligning with their automotive objectives and diminishing the probability of negative feedback. This customer retention approach earns dealerships well-deserved acclaim for prioritizing customer protection. F&I managers taking responsibility for vehicle maintenance instill peace of mind into customers that they will be protected by VSC and their dealership. This elevates the likelihood of positive endorsements and commendations for the company's commitment to customer satisfaction.


At MenuMetric, we specialize in tailoring F&I solutions to meet the unique needs of businesses engaging in vehicle service contract sales. Our industry-leading offerings can boost dealership profits but ensure customer satisfaction and foster a robust brand reputation. Contact MenuMetric today or request a demo to access the transformative solutions you require for lasting success.

Raeleigh Lewandowski
Marketing Specialist
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