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Dealer’s Voice: Behind-the-scenes cost of service

Servicing a vehicle costs the dealership as well as the driver.

Published September 7, 2012

When I first began my career working at our family-owned GM dealership in 1978, I worked as a service adviser. That position served as a great apprenticeship in the retail automotive industry.

In that position I learned about customer service, mechanical repairs and the logistics involved in maintaining work flow. I also learned the importance of solving problems and working with colleagues, suppliers and helping customers.

Service departments in the 1970s were fairly archaic compared to today in terms of tools, technologies, processes and structures. In fact, service departments were often viewed as subordinate to other departments, contributing only about 10 per cent to a dealership’s overall revenues, but 90 per cent of a dealer’s headaches.

Today, thanks to continuous advances in automobile design and technology, improved communications, computerization, the Internet and greater customer expectations, the pendulum has shifted. Service departments now represent a major component of a dealership’s business operations.

Although today’s service departments are busy, dynamic hubs that play an essential role in a dealership’s operations, customers are often mystified about what goes on inside that department. They bring vehicles in for service repairs, pay their bill and then leave.

Customers will occasionally complain about the cost of servicing their vehicles, feeling it is too expensive for a repair done cheaper elsewhere. But for the most part, customers are unaware of the costs and procedures that go into servicing their automobiles.

Operating a reputable service department requires a highly trained and skilful organization, competent management and a substantial capital investment. Service work shouldn’t be judged entirely by the time spent repairing vehicles.

When a trained automobile technician goes to work, many costs have been incurred just to get them ready to do their job. Some of them include: specialized tools, diagnostic software and equipment, stocking a substantial dollar value of parts inventory, wages and overtime pay.

Working in the service department all those years ago taught me another important aspect about servicing customers. They don’t like paying for high-cost repairs.

It is statistically proven that a well-maintained and serviced vehicle will cost less in major repairs and operate more efficiently, ultimately saving you money and headaches.

Another interesting statistic is customer loyalty to dealer service departments. By and large, customers are very loyal to dealership service during the vehicle warranty period. During year four and onward, customer loyalty to dealership service declines, which I believe largely pertains to the consumer belief that repairs cost more at a dealership than at an independent garage. I firmly believe consumers would be surprised by how competitive dealership service repairs can be. It is important to compare parts and labour quotes accurately. Be sure the part quoted is truly the same: A great deal of the price difference tends to be attached to the part.

Car owners don’t like spending money on service but it’s a necessary aspect of owning and operating a vehicle. Ignoring regular scheduled maintenance and repairs risks compromising the safe operation (and the valuation) of a vehicle.

So the next time you bring a vehicle in for service at a dealership, you may not feel any better about spending money on maintenance or repairs, but you’ll at least have a deeper appreciation of the behind-the-scenes costs that go into servicing your vehicle.

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