According to AAA, the average vehicle service invoice cost is now between $500 and $600 in the US. That pricing has been exacerbated by the pandemic where, despite historically low interest rates and high manufacturer incentives, the average age of vehicles on the roads has actually increased to 11.8 years of age. The AAA survey identified that 1 in 3 American drivers can’t afford those repairs without incurring debt, either by credit card or by borrowing.
Still, dealership service departments typically leave it up to the vehicle owner for how they’re going to pay. It’s that structure that can hold the ‘declined services’ rate high and lead to increased breakdowns for the car owner down the road.
But should it be up to the dealership to offer payment plans or financing arrangements for service invoices?
Millennial car owners are feeling the pinch
It seems that millennials are experiencing a higher rate of financial pressure during the pandemic. More than any other demographic, young millennials have been using pandemic relief options like deferrals on their car payments. Ryan Robinson, Automotive Research Leader for Deloitte, said, “The significant difference in take rate by age group which suggests that younger consumers who may have been more negatively impacted by the economic effects of the pandemic are actively looking for ways to compensate for a diminished financial capacity – which is a risk for light vehicle demand and should be a concern for the industry going forward.”
The pressure they face for car payments can be relatable in the service department. Whether for millennials or anyone feeling extra pressure to make ends meet – and whether we’re in a pandemic or not – offering financing for services and repairs could be an answer.
Make financing options available
In the past, dealers who offered financing would have to administer the program. Some may provide in-house payment plans that were high-risk for defaulting while others would need to submit applications for financing prior to collecting payment and releasing the vehicle, often taking hours or days for an approval. These types of financing arrangements just aren’t feasible for the fast-moving service department experience, and they do nothing positive for customer satisfaction.
However, a service financing option like DigniFi alleviates the burden on the dealer while providing access to funds that customers need in order to keep their cars up to date on maintenance and repairs. It serves to improve service and repair approvals for cash-strapped customers, helping them avoid maintenance-related breakdowns in the future simultaneously.
DigniFi offers up to $7,500 in personal auto repair loans, according to their website. It empowers the customer to make the financing arrangement based on their needs with their smartphone, and approvals can be in as little as 2 minutes. All the dealership needs to do is be equipped to accept payment from DigniFi.
Cox Automotive’s Xtime fixed operations solution now includes repair financing options in the FlexPay tool. Dealers can experience new Xtime options at the NADA 2021 virtual show.
Although it isn’t mandatory for dealers to offer service department financing options, it has its place. Even with low customer penetration rates, it can be seen in a positive light for a customer-centric department in the after-sales industry.