Auto dealers shift gears to drive profit in the service department — Juan Flores | KBB

Dealers are looking for new ways to increase sales at the store level and in the service department. Juan Flores, Senior Director of Product Development at Kelly Blue Book (KBB), discusses what dealers need to focus on moving forward in today’s Power Lunch fueled by Cox Automotive.

The change in consumer demand from the used-car market to the new market has led to the macroeconomic patterns that dealers see and are the subject of discussion. According to Flores, “rising interest rates have led to higher monthly payments, which have made buyers more reluctant to buy a new car.” 

Dealers used to make a lot of money selling used cars, but as consumer preferences changed, they had to concentrate on their service department. Especially given that many buyers keep their vehicles longer than average (eleven years instead of eight).

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It’s vital to emphasize that seven out of ten vehicle owners leave dealerships after year five,” Flores says. They are departing because of the lack of pricing transparency, which strengthened the trade-in process. However, according to Flores, price transparency is evolving throughout the entire business, including the service lane. Therefore, “dealer principles need to focus on driving service in the service lane, or they will continue to see consumer leakage.”

To prevent the two primary pain points of customer leakage, Flores says: 

1. Dealers need to focus on the lack of price transparency, as mentioned before. For example, “It’s not until the service manager slides the estimated in-voice across the desk that creates consumer anxiousness.” 

2. Vehicle owners dislike that they can’t confidently obtain current recall information for their vehicles. For instance, with the recent recalls made earlier this week, KBB has searched the provided 17-digit VIN for sufficient recall data.

Conversely, forward-thinking dealers across the nation can seize chances to grow their service departments. When a service and price walk combined are utilized, it highlights the service department. For example, finding a worker to explain costs and expectations to customers and provide overall satisfaction is an intelligent move for dealers to prevent future leaks. 

Because 7 out of 10 owners defect, Flores sees customer loyalty as temporary. But, he also believes that “if these issues get addressed in every dealers’ service department, it will create segmented loyalty.” He adds, “service centers will become, if they haven’t already, a genuine focus of dealer efforts and a significant part of the bottom line.”

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