When I talk to shops, most have seen an increase in recent years in the amount of customer-paid work they are doing. It’s estimated to now total about $3 billion a year nationally, almost 10 percent of the total collision repair market.
There are a number of reasons for that, but much of it has to do with the type of insurance vehicle-owners are carrying. As the average age of vehicles on the road has grown over the past decade, more customers have chosen to carry only liability coverage on their older vehicles. And there are far fewer people with $100 or $250 deductibles, and far more with $750 and $1,000 deductibles. Those two trends result in a lot more work being paid for by the customer rather than an insurer.
A lot of shops are seeing this customer-paid work as way to thrive, not just survive. So how are they capturing it? I see them using three primary tools.
The first is customer financing. Companies like Wells Fargo and GE Capital allow shops to have a customer submit a brief credit application and get a response within minutes. Approved applicants get 90-days-same-as-cash financing; in some cases, 6 month or even 12 month no-interest financing may be available. The shop gets its money in a couple days.
The fees the shop pays vary by program, but can be similar to the fees for accepting a credit card payment. Trade association members can often get a discount on these fees.
A second tool some shops are using to capture more customer-paid work is “gap insurance.” Covering deductibles is unethical and even illegal in some states. But a dealership, for example, can buy “gap insurance” (4ubenefits.com is one provider) for a customer buying a new car that will reimburse the customer for their deductible (up to a designated amount) if they bring their car back to the dealership for collision repair within, say, the next three years. Gap insurance such as this generally averages about $75 for three years.
Independent shops may do the same as part of a “customer for life” program. Clearly a customer is going to remember your shop offers them that deductible reimbursement if they have another accident within the period covered by the gap insurance. It also gives you the opportunity at the end of that period to contact the customer to see if they want to buy continued gap coverage.
A third option I see shops doing to capture more customer-paid work is offering what I call “good-better-best” options. Think about when you buy almost anything, from a TV to wiper blades to a meal at a restaurant; you had options, right? We like having options as a consumer. But how often do we just give a customer an estimate and say, “That’s it,” without giving them some options?
Customers paying for work themselves may especially appreciate options. I would never suggest doing an unsafe repair. But say the plastic tab is broken on a headlight. A “good” option you could offer might be to plastic weld the tab. It’s safe and functional though it won’t look perfect. A “better” option for a little more money might be a used headlight; it may be slightly faded or have some minor stone chips, but it’s safe and functional. The “best” option, if they want to spend the money, is a new headlamp.
Similarly, you might offer an option of just touching up the corner of their bumper, or a option of blending it but limiting the warranty, or a complete repair and refinish of the bumper with your full warranty – a “good-better-best” set of options.
One word of caution: Such options require setting clear expectations with the customer. Saying you’ll just touch up the bumper might not be sufficient; they may show up expecting it to look perfect. So consider, for example, cutting the end off a bumper you are discarding, then touch up the paint on it so you have a sales prop you can use to set clear customer expectations.
Customers like having some options and say-so, and it helps them see you as a trusted advisor, not just an estimator or salesperson. And all these tools can help you capture more of the growing pool of customer-paid work.
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