There are nearly 300 million vehicles on the road today, with an average age of nearly 13 years—an all-time high in the United States. Financing and interest rate hikes, chip shortages, worry about tariffs, increased cost of goods, cycles of growth and decline in the automotive industry, and changing buyer sentiment have all eroded consumer desire for new cars.
And let’s not forget about the sky-high cost of a new ride, which hovers around $48,000 on average, depending on model and amenities. This price point makes the purchase unobtainable for many, so their focus has shifted to preserving the vehicle they already own.
While most people can put off buying a vehicle for a few years, they can’t stop driving in their daily lives. Busy schedules, hybrid work environments and the desire to travel by car are contributing to the need for vehicle longevity. Ultimately, these vehicles must be serviced, and older models require more frequent maintenance and support.
For these reasons, the stars have aligned for after-market solutions. Now is the perfect time for dealers and distributors to focus on profitable strategies to boost their revenue for service, parts and accessories.
Many dealerships and distributors that want to focus on after-sales growth struggle with communication, convenience and throughput. Sometimes the issue comes down to the fact that the service department is too small to serve its growing market. In other cases, the issue is an inconvenient location that customers can’t easily find, or a small store footprint with an understaffed department. But most of the time, sales are lost because the vehicle manufacturer or dealership didn’t invest enough resources from the beginning.
As a result, important processes, procedures, training and focus fall by the wayside, and the Service and Parts department functions as a necessity, rather than a profit center. We’ve found that the dealership’s investment and attention to profit are often skewed. They tend to prioritize initial car sales. But we know that strategy is short-sighted.
Yes, profit usually starts on the showroom floor, but it’s amplified in the service and parts department, where most dealerships make significant gains. And with consumers getting more years out of the vehicles they already own, dealers must consider ways to rethink their strategies.
We’ve found that the connection between sales and service is critical and needs to be communicated during the new car phase. Strategic marketing and customer communication after the sale are also important.
How can dealers solve this process breakdown and capture the revenue opportunity? It starts with analyzing the business’s current state, setting goals to achieve the desired outcome and then motivating the team to make it happen. Here’s a roadmap that can help:
While each dealership and opportunity will vary, we’ve seen a significant lift in parts and labor sales when a dealership follows those steps. For example, we’ve found that dealers tend to see increases of approximately $400,000 annually in parts and labor sales, and a 10-to-15-point increase in service retention.
And when dealerships have more loyal service customers, they tend to see greater loyalty for vehicle repurchase. The cycle then repeats.
With the rising cost of goods and services, new vehicles are a luxury. Buyers are now more hesitant and purposeful with their spending, especially with a large purchase like a new car. If consumers are keeping their cars longer, the focus should be on delivering the best service after the sale. This includes addressing customer needs wherever they spend: in-store, online and through digital platforms.
To capitalize on new opportunities, dealers need to understand their local competitive landscape, align with customer demographics and changing sentiment, and focus on emerging service and throughput. Fewer customers on the showroom floor isn’t the whole picture. When dealerships think beyond selling cars, they can capitalize on an enormous opportunity to extend a positive experience with after-sales parts and accessories.
Article Distributed Via MOTOR Magazine
