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Service plans are booming at The Warranty Group

Dealers are warned that service plans will be even more important to their profitability this year as the achievement of a major car manufacturer suggests increasing competition for the revenue.

The Warranty Group reckons dealers will need to sell more service plans as the used car market looks set to shrink and margins become tighter. But carmakers seem keen to win revenue for themselves.

Mercedes-Benz and Smart between them provided 44,125 service care plans for UK owners in 2011.

The group extended the plans to cover all Mercedes and Smart cars, priced from £19.99 a month.

Ian Simpson, sales and marketing director at The Warranty Group, said: “Used car sales predictions for 2012 make depressing reading.

“Dealers have become very good since the recession at squeezing the maximum margin out of each sale.

“This is through a highly professional approach to selling products such as enhanced warranties so the prospect of a falling used market is very disheartening.”

He called service plans “one of the remaining, unexplored profit areas”.

Mercedes-Benz and Smart service care plans pay for two, three or four consecutive services, covering labour, parts and fluids to conform with manufacturer recommendations.

James Ostridge, Mercedes-Benz UK service contracts manager, said their service plans gave owners real control over their servicing costs.

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