An offer of ``free tires for life'' has helped boost the volume of oil changes by 50 percent for East Ford in Jackson, Miss., but the car dealership is re-evaluating the promotion due to its cost.
The increase in oil changes is an early sign that the free tire guarantee has increased repeat business in the car dealership's service department. But General Manager Jack Bethany has suspended the promotion, which began in May, until he evaluates its long-term cost.
The tires aren't free to the dealership, and the cost of replacing tires could overwhelm the outlet if it underestimates the funds it must set aside to fulfill the guarantee in years to come.
``We are not an insurance company,'' Mr. Bethany said. ``We don't have actuarial tables that will help us determine the risk.''
How it works
Mr. Bethany said the concept of promoting free tires for life at first seemed to be a catchy way to help close deals. The promotion seemed timely in the wake of Ford Motor Co.'s tire replacement program fiasco, he added, and the guarantee of free tires for life might build goodwill with the public.
To qualify for free replacement tires, customers must stick to Ford's recommended maintenance schedule and have the work done at the dealership. Customers get free replacement tires if they have driven their vehicles at least 40,000 miles and the tread is worn to 1/16 of an inch or less.
The guarantee covers only normal wear and tear, not blowouts or flats from road hazards.
The replacement tires must be priced comparably with the original tires. The deal does not apply to heavy-duty trucks.
The program has gotten new-vehicle owners to return for maintenance. Oil changes account for 100 to 120 labor hours a week, up 50 percent from before the program started, said Terry Huhm, the assistant service manager.
The bad news
The free tire offer has been less popular with the sales department because the dealership has set aside $50 per new vehicle sold to cover future replacement tires.
Grumbling among the sales force made Mr. Bethany rethink the program.
So far, about 150 customers have purchased new vehicles with the free tires for life guarantee, which means about $7,500 has been set aside for tire replacement.
Although Mr. Bethany has no idea how many customers will take advantage of the program, he thinks $50 per vehicle is not enough.
He now believes the dealership should be setting aside $100 per vehicle, but that might be too great a price to pay even if the cost is spread over both the sales and service departments. The dealership is going to have to weigh the benefit of increasing repeat business in the service department-which can lead to future new-vehicle sales-against future liability for replacement tires.