According to NADA Data 2019, revenue in dealership service departments is steadily growing statistic. Between 2013 and 2019, dealerships’ total service and parts sales have increased from $42.3 billion to $62.5 billion US. The average customer-pay repair order sits at $311.
Two out of three car owners find it increasingly difficult to find a trusted mechanic for their cars, citing ‘recommending unnecessary services’ and ‘overcharging for services’ as the top two reasons for their mistrust. However, there seems to be confusion between whether dealerships charge too much, or the repairs exceed a customer’s affordability.
Aftermarket garages – the mom-and-pop type and the chain-style quick lube facilities – are capturing a larger piece of the pie. Over time, particularly after the first year and third year of ownership, customers defect from servicing at a dealer to an aftermarket shop. Overall, dealerships only service 13 percent of the vehicles on the road, and car owners believe that they offer better value. That could be a misperception.
Clarifying the Issue
DigniFi provides a lending solution for fixed ops customers in the United States. The CEO at DigniFi, Richard Counihan says, “There’s very little difference in the cost. As you know, you have to break the repair down in two different pieces – there’s the part and there’s the labor. And so on the labor side, independents and dealerships are pretty competitive with what they charge.
“Where I think the biggest difference is, where the perception is, is the type of part that is used on the vehicle. If you go the manufacturer, they are often using OEM parts whereas if you go to an independent they may be using cheaper parts that come out of India or China or Mexico.”
The repair may be cheaper, but the quality comes into question. A ‘white box’ power steering pump may have an expected lifespan of 18 to 24 months, for instance, where an OEM replacement pump may be expected to last five years or longer. Counihan says, “I think it drives the misperception that the dealer is more expensive than an independent repairer.”
Affordability, Not Cost the Issue
Rather, it’s likely that customers aren’t financially prepared for unexpected repair bills at the dealership. Brakes, belts, and tires are at the owner’s expense as maintenance items even while the vehicle is covered under factory warranty. Owners aren’t considering the cost of servicing when making their purchasing decision and find their budget simply doesn’t have room for the added costs.
“Consumers can’t afford many of the recommended repairs that are put in front of them. If you now go to a dealership they’re going to give you a multipoint inspection, go around the car, demonstrate to you what is the recommended service with red, orange, and green,” says Counihan.”And for every three dollars that are recommended by the dealership, only one dollar is going to be spent. The deferred maintenance that customers are doing is quite a significant number.”
The business of lending money for service repairs has increased for DigniFi. “Our average loan is about $1,500 and the average payment is $75. What we’re finding is that because they’re able to turn it into a payment, customers are now doing the recommended maintenance or repairs.”
Dealers Can Help with Affordability
For dealers, an important component of the service visit can be helping customers find a way to afford their repairs. Deferring repairs often means they stack up in the future and the list never catches up where financing options allow the customer to get current with their service and repairs and pay back on their schedule.
And while it might be tempting ‘play it safe’ and schedule maintenance earlier than the manufacturer’s recommended schedule, it can damage both the customer’s perception of value at the dealership as well as the ability to afford truly necessary services.
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