July 27, 2021

Maximizing Service Profitability

NAC Blog
NAC Blog

Maximizing Service Profitability

Times of change often present the best opportunity for growth and development, and the auto industry is most certainly experiencing such a period today. As the auto industry emerges from the pandemic, a microprocessor shortage is causing dealer inventories to shrink rapidly amid consumer demand that outpaces stock levels; average prices are climbing higher for both new and used vehicles.

Many shoppers fully expect to have to pay at least MSRP for their new car, and dealer margins are booming. However, those who have spent an economic cycle or two in the auto business know that current market conditions won’t last forever: getting comfortable would be a mistake.

Your dealership’s sales department gets a lot of oxygen, but don’t neglect your parts and service departments: now is the time to set them up for long-term profits and stability! Read on to learn about two areas that will be critical to the future of your service drive’s profitability.

Capturing Warranty Work

Maximizing the number of warranty repairs performed at your store is a crucial way for dealership service drives to attain long-term profitability and revenue growth. As manufacturers increase warranty terms and build more high-tech vehicles (complete with more parts and systems that could fail and need repairs), and as drivers hold onto their vehicles for longer, all a dealership needs to do is capture this naturally-occurring source of repair orders.

Annually, warranty service growth is outpacing customer pay service work significantly: 7.7% yearly growth versus 1.3% over the last 5 years. Bringing these customers back to your store during their warranty period and giving them a positive experience—what Ward’s Auto calls the “warranty test drive”—will help establish the dealership as their go-to facility for routine maintenance and service work down the road. Your watchwords should be quality, transparency, expertise, and customer service.

Leverage Technology

Bringing in more service and parts business is only one part of the equation: each sale should be as efficient as possible. Digital tools are an indispensable part of doing business in 2021, even for parts and service. Is your store set up to sell parts online? Is your service department’s workflow optimized with digital tools and services that cut down on wasted time? Is your service drive keeping up with today’s technology to create a modern workplace that appeals to Millennials and Gen Z?

These are all considerations that dealers should be working to realize in their parts and service department this year.  

The Takeaway

Technology can also make relations with your customers more efficient while still resulting in increased customer satisfaction. For example, new data shows that communication by text is gaining traction as the preferred method, and that texting speeds up repair approvals and improves follow-ups.

Enabling online appointment bookings is another way to use technology to save your service staff time while still giving today’s customers what they want.

Want even more insights on this topic? Check out the video of our latest episode of Fixed Ops 5, featuring special guest Jim Roche. And be sure you're subscribed to our YouTube channel as well as our podcast which is available on Spotify, Apple Podcasts, Pocket Casts or wherever you listen.



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