Deal Pack Blog

Do BHPH dealerships really need a service department?

This is probably a question that circles dealerships every so often: is there another way to offer better service to customers and help the bottom line? It’s a simple question with a simple answer, “Yes” according to some experts.

A few good reasons for a service department in today’s market, is that car buyers have more choices than ever before, and they are looking for complete service, not only a place to buy a car. Another reason to operate a service center is cash flow. When it comes to service and reconditioning vehicles, the dealership is in control.

Service departments are an excellent way to stay connected with a customer between vehicle purchases. Owners keep their vehicles longer than ever today, for an average of 72 months when bought new and almost 50 months when bought used. The average car on the road is nearly 11 years old. The longer ownership periods present opportunities for dealership service departments to develop a relationship between contracts. If 3-5 years pass by, it’s possible a customer will forget who you are but if a customer brings the vehicle every few months for an oil change or tire rotation that creates a great opportunity to stay connected.

A few examples of how service departments contribute in a positive way on the bottom line of some dealerships:

  1. Figures from some experts reveal that a good service center can generate enough profit to cover at least 55% of fixed expenses.
  2. Quick service first-use rate has jumped from 40% to 73% for a specific location.
  3. A location in Florida was making efforts to win back owners of older, higher-mileage vehicles and are being very successful adding up 25% of those customers to service work.

A service department can also reduce cost on things like recondition and it can potentially reduce turnaround time on moving a vehicle from the auction to the car lot. Some dealers have converted sections of the service department into quick-service operations adjacent to the service drive and visible to customers. More than lube-oil-filter outlets, these centers feature multiple lifts and multi-function alignment racks. Every vehicle enters the service process here from the write-up. Light service work is done here, such as a vehicle alignment check, whereas the heavier work is moved into the main shop.

Keep in mind, you don’t have to start off too big, the best approach is to work on your own vehicles first before offering service to the public, this way you can find the things that work and the things that don’t work. Another option is to talk to other colleagues to get some insides on the business and any recommendations to get a feeling if the dealership really needs a service department.

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