Why Every Dealer Should Offer LOT Warranties — Boost Trust, Drive Sales, and Maximize Profit

In today’s competitive automotive market, dealerships need more than sharp pricing and flashy ads to stand out. They need trust, transparency, and value-added programs that reassure buyers and drive long-term loyalty. One of the most effective strategies is offering LOT warranties.

Unlike extended vehicle service contracts, LOT warranties are dealer-backed, short-term coverage that comes included with the vehicle. By offering this protection, dealerships not only win customer trust but also increase close rates, reduce disputes, and open doors for upselling additional coverage.

According to the National Automobile Dealers Association (NADA), warranty-backed vehicles consistently sell faster and at higher margins than those without.

What Are LOT Warranties?

A LOT warranty is short-term coverage, usually 30–90 days. It typically covers critical systems like the engine, transmission, and drivetrain. Unlike a vehicle service contract (VSC), which requires an extra purchase, a LOT warranty is automatically included, making it a powerful sales tool.

The Benefits of LOT Warranties for Dealerships

1. Build Trust and Transparency

Studies by Cox Automotive show that 72% of buyers rank trust as their top dealership factor. LOT warranties signal dealer accountability.

2. Reduce Post-Sale Surprises

Nobody likes the stress of unexpected repair bills right after buying a car. A LOT warranty gives buyers peace of mind by covering common issues during the first weeks or months of ownership. This reassurance helps customers feel confident in their purchase and avoids the frustration that often leads to negative reviews.

3. Build Loyalty and Drive Additional Profit

LOT warranties don’t just protect buyers in the short term, they encourage customers to return to the dealership for service. Each visit builds trust and keeps your store top of mind for future needs. Once customers experience the value of dealer-backed protection, they’re more likely to purchase extended coverage, schedule regular maintenance, and choose your service department over competitors. This combination of loyalty and upsell opportunities adds significant profit beyond the initial sale.

Why Every Dealer Should Offer LOT Warranties

• Boost Trust: A LOT warranty reassures customers and sets your store apart.

• Drive More Sales: Buyers are more comfortable committing when risk is reduced.

• Maximize Retention: Warranty Visits Keep Customers Coming Back

  Every time a customer returns for a warranty-related repair or check-up, it strengthens their relationship with your dealership. These visits build familiarity and trust, making it more likely they’ll choose your service department for future maintenance and repairs. Over time, this consistent engagement keeps customers loyal, and loyal customers are far more valuable than one-time buyers.

LOT Warranties vs. Extended Vehicle Service Contracts

Many dealers ask: What’s the difference between a LOT warranty and a VSC?

• LOT Warranty: Short-term, included at purchase, covers essentials.

• Vehicle Service Contract (VSC): Long-term, separate purchase, customizable to customer’s driving habits.

Together, they create a seamless protection strategy for dealers and their customers.

Customer Retention: The Hidden Power of LOT Warranties

McKinsey & Company reports that dealers lose up to 70% of service customers to independent repair facilities within three years. LOT warranties ensures that when customers back to the dealership for covered service, the consumer is confident in the quality of the repairs and provides opportunities for retention.

Final Thoughts: Why Dealers Can’t Ignore LOT Warranties

LOT warranties are a proven way for dealerships to:

• Build trust and transparency

• Increase sales and customer retention

• Maximize customer satisfaction

In a competitive market, standing out isn’t about offering the lowest price, it’s about delivering the most value. LOT warranties give dealerships a clear, customer-first advantage.

Learn more about building profitable warranty programs at the Pessada Education Center