Why Is General Motors Company (GM) Offering Free Maintenance?

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A more subtle, but important, benefit from this new program
Another analyst had a somewhat different take on General Motors Company (NYSE:GM)’s new program. Eric Lyman is vice president of residual values for ALG, a company that sets residual values for automaker’s new-car leasing programs. A car’s residual value is an estimate of what it’ll be worth when the lease is up – critical for pricing new-car lease programs, which can be intensely competitive. Obviously, higher values are better.

Lyman suggested that the free maintenance program could be seen as an alternative to incentives, the cash-back or cheap-financing deals that automakers offer to spur sales, and could be related to GM’s desire to increase its residual values. As he said in a statement, “While cash incentives have a direct, negative impact on the future resale value of a vehicle, free maintenance programs can have a positive halo effect on brand value.”

I noted back in April that General Motors Company (NYSE:GM)’s leadership was working on ways to improve the company’s residual values, which had improved from “terrible” to “respectable” but still fell short of the industry’s average, not to mention those of mass-market leader Honda Motor Co Ltd (NYSE:HMC) . This new program might help.

Last but not least, the dealers will love this
Of course, GM’s dealers will absolutely love this program, and that was surely a key consideration for GM’s leadership. More maintenance business and more repeat customers are exactly what any dealer wants – but now, GM’s dealers have to step up and deliver the kind of positive experience that will generate repeat customers.

The article Why Is GM Offering Free Maintenance? originally appeared on Fool.com.

Fool contributor John Rosevear owns shares of General Motors Company (NYSE:GM). Follow him on Twitter at @jrosevear. The Motley Fool recommends General Motors.

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