On the Dash:
- Fixed operations are the backbone of dealership profitability, yet national fixed absorption averages remain below optimal levels.
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Considerable revenue is being missed, including tire sales and out-of-warranty service work.
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Service departments drive customer loyalty and retention more than sales floors.
Fixed operations, such as service and parts departments, are the most lucrative areas of dealership profitability, yet many owners and managers undervalue their potential.
Experts recommend that a healthy dealership aim for a fixed absorption rate of 100% or higher, meaning service and parts profits cover all operating expenses. In August 2025, the national average fixed absorption rate reached 63.9%, up from 61% in August 2024, with some Virginia dealerships surpassing 105%, according to NADA’s October Dealer Academy data.
The data also revealed that revenue opportunities in fixed operations remain untapped. For example, 75% of customers will buy tires from the first recommendation they receive, yet franchise dealerships account for just 8% of tire sales. Additionally, 86% of vehicles are out of warranty, and most service work is performed outside dealership service departments.
Notably, service advisors interact with 10 times as many customers each month as a salesperson selling 10 vehicles, which highlights the sales potential within service departments.
Further, service departments shape customer perception and loyalty more than showrooms do. Even minor inconveniences, such as slow Wi-Fi, can deter repeat visits. Poor phone management compounds the problem, as dealerships collectively lose roughly $1 million annually due to mishandled calls, voicemails, or customers left on hold.
To capitalize on these opportunities, dealership leaders should focus on optimizing service department processes, improving phone handling, and efficiently executing warranty service. Attention to these areas can unlock hidden revenue streams, strengthen customer loyalty, and boost overall performance.
While fixed operations are crucial to profitability, national averages remain below optimal levels. By addressing missed opportunities, such as tire sales and out-of-warranty work, and prioritizing education, dealers can elevate fixed operations and ensure sustainable success in today’s competitive automotive market.
