Car Dealers Seek to Improve Service Business

23 March 1999

With Profits From Sales Under Pressure, Car Dealers Seek to Improve Service Business

    METUCHEN, N.J.--March 23, 1999--"What customers don't always understand," said an Indiana Cadillac dealer, "is that the markup from my invoice price to the manufacturer's suggested retail price is only 8.5 percent and that doesn't leave much room for negotiation." The dealer also went on to point out that very few sales are actually transacted at that sticker price. From whatever profit is left after the customer drives away from the showroom, dealers must also pay sales commissions, advertising, interest, rent, and the salaries of other sales department employees. No wonder dealers claim they don't make money selling new vehicles.
    To counter the trend in the new vehicle department, many car dealers have sought to boost their profits by concentrating on used vehicle sales. That worked for a while, but cutthroat competition among the vehicle manufacturers has resulted in new car prices that are comparable with used vehicles.
    That leaves what dealers refer to as their Fixed Operations, the service and parts departments, as the only reliable source of profits in the business. But for years, dealers have contented themselves with handling the mostly "captive" service business associated with new vehicle warranties and certain repairs that only dealership personnel can perform. The lucrative, higher volume maintenance and general repair business was ceded to independent chains like Pep Boys, Goodyear, and Firestone along with the traditional mom-and-pop repair shops. As a result, and estimated 70 percent of this $200 billion-a-year business is now controlled by those independents.
    Both Ford Motor Co. and General Motors, in an effort to assist their dealers, have developed programs aimed at regaining some of that lost service and parts business. Ford's Quality Care Maintenance and GM's Goodwrench Service Plus help dealers in marketing and pricing their more routine service operations. Dealers too are working to gain an edge. Many attend brainstorming conferences like the annual International Service and Parts Summit which attracts both car dealers and their managers from across the country. This year's Summit will be held at the MGM Grand Hotel in Las Vegas on May 5 - 7.
    Top industry thinkers representing companies like ATcon, Mike Nicholes, Inc., and Dealer Service Corp., will join the attending dealers and present a graduate level seminar in service and parts management.
    The annual International Service and Parts Summit is sponsored by WD&S Publishing of Metuchen, NJ, a provider of information services for franchised new vehicle dealers.

Source: WD&S Publishing, Metuchen, NJ