Service plans are as effective as PCPs at retaining customers, according to The Warranty Group.

It says that similar results from the two products are being reported by franchise dealers, independent garages and car supermarkets.

Commenting on the issue, Serkan Obuz, head of corporate sales and training, said: “PCPs have long been thought of as the leading tool for customer retention within the motor industry but the results we are seeing from service plans are very much comparable.

“In terms of building a relationship, both products are actually very similar in that they keep the customer returning in a structured manner over the lifetime of a contract.

“Within that period, it is up to the dealer to perform well enough that the customer builds up a level of trust and eventually buys another car on PCP or another service plan.

Obuz said that PCPs and service plans were sold as complimentary products in many dealerships and increasingly in the used car sector.

He added: “New cars are often sold with manufacturer service plans as part of their proposition but, as PCPs increasingly gain traction in the used market, we are also seeing increased penetration of service plans.

“A customer who is financing a three-year old car on a three-year PCP is a natural prospect for a service plan. Dealers who are able to offer a single monthly figure covering the financed amount and planned maintenance are finding that this proposition has a high level of appeal to customers who prefer a ‘pay monthly’ approach to motoring.”