auto

Do car dealer loyalty plans save cash?

"The letters address topics such as 'how to get your vehicle ready for a summer trip' and 'how to know when you need to replace your battery,'" Gorun says. The information is typically delivered as an informational note, without any heavy-handed sales pitch, he says.

The goal is to give the customer a certain comfort level with the dealer, Gorun says. "Hopefully, consumers would feel that they're receiving a higher level of service.”

MediaTrac recently reported its loyalty-based savings product, LoyaltyTrac, has more than 5 million consumer members. These members signed up for the rewards program at various dealers nationwide.

Buyer beware

Not everybody is convinced that loyalty programs are the best auto repair option for consumers, however.

Ridout says the programs are often simply a way for dealerships to make more money in tough times.

"These loyalty programs are expanding in part because there is a scramble to generate new revenue for dealers who fear for their futures," he says.

Ridout is wary of the notion that loyalty programs save customers cash, especially because dealerships often charge higher than independent mechanics for the same services. Dealers who charge more contend they are more familiar with the complex makeup of certain car brands and can more accurately diagnose a problem and fix it, he says.

Ridout acknowledges such logic is often justified for more complicated repairs. But for routine jobs, a local auto repair shop may do work that's just as good for a fraction of the fee, he says. He believes that many of the dealer loyalty discounts carry the highest profit margins for the dealer.

"It's a dollars and cents issue," he says. "Because of the high margins, prices on these services can vary widely between dealers and independent shops, so consumers should comparison shop first before getting any auto work done."

Ridout says there are cases where it makes sense to join a dealer's loyalty program. "If a car is still under warranty, it could be a good idea to visit your dealer and benefit from whatever loyalty offers are available," he says. "If the discounted price for a service is competitive, it's certainly worth considering.

"But once the car is out of warranty and needs simple services like oil changes and tire rotations, it behooves consumers to comparison shop first before getting any work done."

Gray agrees that consumers should do their homework before deciding to have a dealership perform routine maintenance work.

"I recommend to consumers that when they need service completed on their vehicle, they should get a quote from three sources: the dealer, a major chain and an independent," Gray says. "The key is to make sure they are comparing apples to apples. For example, make sure the replacement parts are of the same quality at all locations."

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