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From: Jared Hamilton
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Richard Holland

Richard Holland Managing Director

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Car Buying Trends Show Service Is the Future of Dealerships

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No one doubts the average age of vehicles on the road has gone up. The current average vehicle is 11 years old and trends in consumer purchases indicate this statistic isn’t going to change any time soon. In fact, indicators suggest average vehicle age might increase.

 

Automotive News recently reported that loan lengths for new and used vehicles in the United States hit record highs in the first quarter of 2015. New vehicle loans had an average term of 73 to 84 months. Typical manufacturer warranties are only around 36 months. So consumers who don’t purchase extensions could find themselves out-of-warranty with 48 months of loan payments still to go.

 

To aggravate the issue, GM announced in March that they’re going to decrease the warranty on Chevrolet and GMC vehicles and eliminate free service. And we all know the defection rate for service customers increases when their vehicle’s warranty ends. So what can you do to retain these essential customers?

 

Invest in Service Advisor Training

 

Consider investing in service advisor training so your team can watch for out-of-warranty situations. And get your F&I department involved when your advisors identify potential defections. Look in your DMS to see if the customer’s vehicle has an extended warranty. For new vehicles, the customer often still has the option to purchase an extended warranty right up until the manufacturer warranty expires.

 

Used vehicles aren’t so clear-cut. But F&I can still easily identify if they’re eligible and what kind of coverage is available. You can gain more F&I revenue and increase your chance of retaining customers if you reach out to these long-term borrowers and offer solutions that serve their needs. An integrated process to identify these service customers will keep them in your shop long past when their manufacturer warranty expires.

 

Inform Your Motorists

 

Many motorists don’t realize they can purchase an extended warranty even after they buy their car. They probably also don’t know about any prepaid maintenance programs your dealership offers. Motorists can often purchase these after the initial sale as well.

 

Educate your customers in the service drive and you’ll better demonstrate that you have their best interests in mind.

 

Investigate Warranty Opportunities

 

Motorists these days often choose to purchase more expensive vehicles for longer periods of time because they want a nice car that fits their budget. They are willing to make longer-term loan commitments to make this happen. So you can safely assume these same motorists don’t want to face high repair bills right after their vehicles go out-of-warranty.

 

An F&I presence in the service department—whether that’s through training, or a concerted effort to identify good candidates who already have appointments—can help your dealership and the service department stay healthy and produce revenue for years to come.

Mark Miller
This echo's the statements from a discussion we had indicating that sales must introduce service to a new owner and start that relationship from day one for a dealership to be successful in all departments and retain a maximum number of customers.
Alex Lau
It always amazes me to see dealers ignore (probably more so due to the lack of the dedication of co-op dollars) fixed-ops marketing. Having worked with a number of dealers and automotive agencies, which has diversified my experience, the vast majority of dealers make loads of profit from service and parts. Dare I state, more so than new and used car sales.

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