ELLSWORTH, Maine—A small Subaru dealership on coastal Maine has given $2 million back to its customers over the past decade.

Not in cash but in tires.

Stanley Subaru gives its new-vehicle buyers a benefit it calls “Tires for Life.” As long as customers follow Subaru's recommended maintenance schedule and have Stanley Subaru perform the work, the dealership replaces their tires for free when they wear out.

The offer, started in 2003, has helped the auto dealership achieve one of Subaru's highest customer-retention rates in the country and healthy sales growth even before the auto maker got on its current hot streak. From Ellsworth, a town of around 8,000 people near Acadia National Park, Stanley Subaru sold more than 800 vehicles in 2013 and is on pace to top that this year.

“This is our version of a frequent-flyer program, and we have built our brand with it,” said Mark Politte, the dealership's owner. “It's an expensive proposition, but we just try to give them value with each transaction.”

The concept is not unique, but the way the deal works at Stanley Subaru is.

Many similar-sounding programs are offered through vendors that package them for car dealerships and manage claims. They generally have restrictive requirements that force customers to spend considerably more money and disqualify anyone who misses a service or ever gets work done elsewhere.

A South Carolina Ford dealership posted a chart on its website estimating that a competitor's free-tires offer required nearly $5,000 of service work to qualify for two sets, and a Texas company that sold more than 11,000 “Tires for Life” policies to dealers collapsed with an ugly bankruptcy in 2009.

Stanley Subaru's deal predates most of the others and is an in-house creation, which gives management full control over it. When such offers haven't worked well, it's because “they looked for reasons to kick people off the program, and if you're trying to make it work financially, you kind of have to do that,” Mr. Politte said.

“We really do try to keep the bigger picture in mind,” he said. “We want to encourage people to come back. We don't want to kick them off the program. Everybody misses a service or is late for a service or is down in Florida and has to have their oil changed there. If they demonstrate intent to stay loyal with us, we will find a way to honor the intent of the agreement.”

John Hutchins, who manages the dealership's business development center, said customers pay an average of $800 to $900 to follow the Subaru maintenance schedule in their vehicle's first 35,000 miles, which is around when the original set of tires needs replacing. On some vehicles, the free tires would cost nearly $800, including installation, he said, meaning the savings can almost equal the total paid for maintenance to that point.

“We don't use it as a revenue generator,” Mr. Hutchins said. “The benefit for us is they keep coming in for service, and a happy service customer will buy more cars from you.”

Despite its name, the program has a maximum benefit of $2,000 per vehicle, which is enough to cover the length of time most customers keep their vehicles. Mr. Politte said he has made adjustments over the years to keep the program working, particularly as wheel sizes have grown and tire prices have increased, making its cost rise “exponentially.”

The dealership usually installs Sumitomo-brand tires, which it chose based on high ratings from Consumer Reports. But customers can select more expensive brands if they pay any price difference and can have them installed sooner than the program allows for a prorated charge, based on how much tread depth is left.

“Tires for Life” is one of three relatively uncommon free perks that form Stanley Subaru's “Preferred Guest Package.” The store also offers a lifetime powertrain protection plan on most used vehicles and provides loaners—Outbacks, Foresters, Imprezas and Crosstreks that are less than 6 months old—during any type of service visit.

The powertrain coverage is good on any used vehicle that's no more than nine model years old and has fewer than 85,000 miles when purchased. That benefit is provided through an outside insurance policy that Mr. Hutchins said costs the dealership about $300 per vehicle.

Mr. Politte, who used to work in sales and marketing at Ford Motor Co., bought the dealership in 2004 from his father-in-law, Dick Stanley, who opened it in 1999. Mr. Stanley, a longtime education and training executive with Chevrolet, died in 2012.

Mr. Politte said Subaru used to provide customer-retention data showing that Stanley Subaru was one of its top five dealerships in the country by that metric.

He said his loyalty rate remains high but the comparison data are no longer shared.

But there are other measures of loyalty: One customer has been so appreciative that she brings in homemade baked goods for the staff every week.



This report appeared in Automotive News, a Detroit-based sister publication of Tire Business.