Service departments were busier and more profitable in August thanks to rising demand and cost increases, according to data published by Cox Automotive.
With summer ending and cold weather approaching, car owners have started to visit their dealers’ service departments in greater numbers. Although total volume fell slightly behind last year’s pace, repair and maintenance orders rose 8.2% in August. This represents a complete reversal from July, which Cox Automotive previously reported was the slowest since 2018. The demand surge also helped dealers rake in better earnings.
Revenue from repair and maintenance orders increased 2.3% from the previous month and 4.3% from last year, pushing revenue for the period to a five-year high. Compared to August 2019, earnings were up by 34%, reflecting the aggressive efforts of dealers to boost fixed ops profitability since the onset of the COVID pandemic. While higher demand translated to more cash, service departments chiefly benefited from general price increases across the market. As Skyler Chadwick, director of product consulting for Cox Automotive, noted, “The surge in service revenue is primarily due to the higher cost of parts, labor and major services.”
August’s volume and revenue increases emphasize the crucial role fixed operations play in today’s dealerships. While demand for new and used vehicles has fluctuated heavily over the last three years as many car owners have opted to wait out unfavorable market conditions, drivers are less able to ignore repair and maintenance, meaning service departments will always be a reliable source of income. Nevertheless, as electric vehicles increase in popularity, storefronts must ensure that their technicians and management teams are just as prepared to handle the service needs of battery-powered vehicles as they are for petrol-based models.