Dealer service departments fighting for business

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Smiling female customer service agent prepared to greet customers to an automotive dealer service department.

Better service and competitive rates are key elements to dealer service departments improving their bottom lines. (Photo: ThinkStock)

The recession has forced many consumers to hold onto their cars for longer than they’d planned, which is both a blessing and a curse for dealer service departments, says Wards Auto. Car sales and warranty jobs are down (as well as the market for auto loans), which has prompted dealer service departments to intensify their efforts to market their services to the public. Increases in ad spending – by as much as 30 percent for some dealers, according to Wards – carry the hope that the market will begin to show more positive returns.

Dealer service departments may see short-term gains

Consumers who keep their cars for a longer period of time will inevitably run into more situations where auto repair and more extensive vehicle maintenance are necessary. Simply put, “If people keep their cars longer, there is business to be had,” says DriverSide CEO Jad Dunning. AutoMD indicates that nearly half of drivers in a recent poll have driven their current cars more than 100,000 miles. The short-term added repair costs that go hand-in-hand with such increased mileage is estimated to be about $2,500 per car owner, said AutoMD President Shane Evangelist.

But long term, dealer service departments are predicted to lose out

J.D. Power and Associates estimate that dealer service departments could lose as much as 20 percent of their expected business between now and 2013, Wards reports. This indicates another area where dealers are looking to improve: retaining customers, rather than losing them to non-dealer shops. Better customer service and more competitive pricing are the main tools dealerships will attempt to use to stop the bleeding. In addition, expanding service to seven days per week and making more frequent contact with customers are popular ideas. Upselling extended warranties and pre-paid maintenance plans may also be necessary.

Focus on maintenance, rather than warranty work

As there are fewer new car sales today, it pays to shift away from a business model that depends upon warranty work. Older cars that are not still covered by warranty will need frequent service and repair, thus defining a new business model for service departments. Also, expanding dealer service departments’ inventory to include more accessories is a goal dealers like Sid DeBoer of Medford, Oregon’s, Lithia Motors have in mind. He told Wards he is “frustrated we don’t do better in accessories.” The same chain has a Sacramento, Calif., store that leads the way with accessory sales, so DeBoer hopes his dealership can follow suit.

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