Your service department is the backbone of your dealership. Through economic ups and downs, changing customer expectations, and new technology, service has stayed a steady source of profit and growth.
But the industry around it hasn’t stayed steady.
For the past several years, many dealers have covered rising costs by raising the labor rate in service. It worked. But it may not keep working.
Labor rates are still climbing, and long-term profit is getting harder to hold onto. Price alone can’t carry growth anymore.
So, what does drive growth in this market?
The answer starts with a clear look at the health of the service department, using the numbers that matter most:
- Hours (both total sold and per repair order).
- Effective Labor Rate (ELR).
- Profit per customer-pay repair order (RO).
These are often called the “golden metrics.” They can vary a lot from one dealership to the next, but together they show whether a store is staying profitable and where it has room to grow.
The end of easy growth
Recent reports show a clear change: Higher labor rates no longer guarantee higher profits. In several market segments, ELR went up while profit stayed flat or even dropped. Why?
It comes down to hours per RO. When repair orders carried fewer hours, the higher rate couldn’t make up for the lost work. There is also a limit to what customers will pay (often called price elasticity). At some point, dealers won’t be able to keep charging more.
The takeaway for 2026 is simple: Rate increases have a ceiling. Hours and job mix, not just labor rate, drive profit.
Hours per repair order: Where growth happens now
Over the past year, the number of repair orders has stayed mostly flat. Economic pressure is the likely cause. Customers may be putting off extra repairs so they can spend that money on other needs. When RO count isn’t growing, every customer visit matters more.
A 2026 report found that hours per RO grew sharply in rural areas (up 12.8 percent year over year), while major urban areas saw a moderate decline. Rural dealerships also saw profit per customer-pay RO rise by $27.53, compared to a gain of only about $2 the cycle before. Rural numbers tend to swing more, since there is less volume to even out the highs and lows. Still, the report notes that higher-volume shops in smaller markets are capturing more meaningful work.
Smaller shops should take note, too. The two lowest-volume groups both lost ground on hours per RO. Shops with 300 or fewer customer-pay ROs a month dropped 2.2 percent.
More hours alone aren’t the goal. Hours help when they come from real, needed work (for example, techs catching deferred maintenance or customers approving more of the recommended repairs). Because of volume differences, urban and metro stores may not reach the same benchmarks as rural stores. But any dealership that adds productive, profitable hours to each RO can set itself apart, growing profit through efficiency instead of price increases alone.
Technician productivity: The biggest opportunity
Efficiency and productivity are the two pillars of service profit. The place they make the biggest difference is with your technicians. Techs are key to growth, but they need the right tools to work as efficiently as possible. Often, these tools automate steps like checking whether parts are in stock and what they cost before the recommendation goes to the advisor to add to the RO.
When this work is done by hand, quotes are more likely to be wrong and time gets lost. Recent data indicates that dealerships using a tool to handle these steps saw strong results compared to dealerships without one. The smallest shops earned $103.47 more profit per customer-pay RO, with an ELR $20.73 higher (about $15,520.50 more profit per month on average). Mid-to-high volume shops averaged $55,797.76 more profit per month. The highest-volume shops sold 407.04 more hours per month and earned $46,248 more profit per month (an extra $554,976 per year). The gains showed up across every metric measured:
- More total labor hours.
- Higher hours per RO.
- Higher effective labor rates.
- Higher profit per customer-pay RO.
Dealers who make it easier for techs to find and present needed repairs capture much more revenue and profit than those still relying on manual processes.
The winning formula
Higher labor rates used to be enough to drive growth. In 2026, productivity matters more than price. The highest-performing service departments:
- Add productive, profitable hours to each repair order.
- Improve technician efficiency and productivity.
- Use technology to uncover additional opportunities.
- Manage labor rate increases carefully as markets approach pricing limits.
The road ahead may be bumpy. You’re dealing with economic pressure, rising costs, and an ongoing cost-of-living squeeze. But those who focus on what they can control (making the most of every RO and helping technicians be more productive) can weather those challenges and still grow profit.
For a more detailed breakdown of the performance metrics shaping service department profitability, check out the 2026 Fixed Ops Golden Metrics Report.
