Two years ago, the Subaru bug bit Mike Preston. It's not too surprising; tuned versions of Subaru's hot WRX sedan are as thick as flies in Southern California, and the Orange County city of Yorba Linda, where he lives, is no different.
Irretrievably smitten, the 19-year-old sold his Jeep and drove away from Renick Subaru in nearby Fullerton with a brand-new WRX wagon. But it wasn't the last time he would see Renick. Far from it. His car soon would become a poster child for the dealership's burgeoning aftermarket parts business.
After he scraped together some more money, Preston purchased an intake, exhaust and programmable computer system from the dealership's parts department. Over the 18 months since he purchased the car, he estimates he has spent more than $6,000 at the dealership in parts and accessories.
Dealerships have been selling aftermarket parts since the first license plate frame was engraved and chromed. But now that annual aftermarket sales are approaching $20 billion, many car dealers are stepping up their operations. Dealers are offering customers a wide selection of appearance and performance parts that far outstrip the selection of original-equipment accessories.
Renick Subaru's parts department reflects this trend. With stainless steel exhaust systems, high-performance clutches and upgraded turbochargers on display, the dealership's parts department looks like a high-end tuner shop.
West Palm Nissan went one step further, opening a separate operation called Palm Beach Performance. The dealership group's performance division sells items from basic bolt-on performance parts to turbo systems for the 350Z and Sentra SE-R. It soon will expand its operation to include Mazda, Scion and other brands that the dealership group sells.
Central Texas is truck country. Jerry Reynolds, owner of Prestige Ford in Garland, Texas, knew he was missing out on a large revenue source when he would see customers' trucks modified barely two weeks after they were purchased.
When customers would come back to have their license plates put on, Reynolds noticed how much modification had taken place in that short time. "We realized that we were missing a market," he said.
Industry trends back up Reynolds' observation. According to the Specialty Equipment Market Association, total aftermarket spending averages $1,500 per vehicle buyer during the first year of ownership. And most of that spending is done during the first 90 days.
Dealers are hungry to make additional profit," according to Ellen McKoy, SEMA's senior director of dealer relations. "What used to be traditional profit centers have diminished or evaporated."
Light trucks are the largest aftermarket segment, accounting for $10.6 billion in retail sales in 2004. The compact car tuner market has grown significantly over the past 10 years, accounting for $4.1 billion in retail sales in 2004, SEMA says.
SEMA says appearance accessories are the biggest sellers, and wheel and tire combinations are the most popular. Billet grilles for trucks are consistent big sellers, and mobile entertainment systems, including DVD players and upscale sound systems, have become popular.
Sales of camper shells for pickups have tailed off, but spray-in bed liners are gaining traction.
Meanwhile, the compact car tuner market has shifted in recent years, emphasizing speed rather than outrageous appearance. Florida, the Northeast and the Pacific coast enjoy strong markets for tuner cars, while trucks are dominant in Texas, the Midwest and the South.
Most accessory sales happen at the time the car is sold, notes SEMA's McKoy. Dealerships must have a good feel for the tastes of the local market and should display accessories prominently on the showroom floor or lot.
"If customers don't see accessories, they won't think they're offered. They won't ask for them," McKoy says. "They'll go down the street to another dealership that displays them."
Dealers also must be quick on their feet to keep up with the rapidly changing aftermarket. Leonard Renick, general manager of Renick Subaru, notes that the difficulty in managing performance part inventories can discourage some dealerships from taking the plunge.
"The buzz goes around on the Internet that there's some new performance part," he says. "There's a flurry of activity to purchase those, but that flurry doesn't last beyond 60 to 90 days."
If a dealership is overstocked on that item, he notes, it might be stuck with it after demand dies.
To avoid warranty and liability concerns, Renick doesn't install performance parts on the premises. That's a major difference between his store and West Palm Nissan's performance division.
In fact, Palm Beach Performance has grown large enough to attract customers beyond West Palm Nissan's base.
"Now 50 to 60 percent (of West Palm's customers) are coming from other places," said Mike Wade, manager of Palm Beach Performance. He notes that customers are coming from Miami, Fort Lauderdale and even Melbourne, which is 100 miles to the north.
The expanding aftermarket has caught the eye of automakers, many of whom have introduced more variety in their own lines of accessories. They enjoy one big advantage: Automakers' accessories enjoy a full factory warranty, which is attractive to both the dealer and customer. And some dealers believe that by selling the automaker's accessories, they are supporting the brand.
That's why Prestige Automotive Group in New Jersey (not related to Prestige Ford) sells only a few aftermarket items from third-party manufacturers. Prestige Automotive retails mostly upscale marques such as BMW, Lexus, Mercedes and Mini.
Christopher Turner, vice president of Prestige Automotive, says that the Mini brand moves the most accessories, and that 96 percent of those accessories come from BMW. "We only have so much effort to put in at the dealership," Turner says. "By offering manufacturer parts, we better support the brands that we sell."
In the 1990s, Penske Honda in Ontario, Calif., sold a lot of aftermarket parts. But the dealership has scaled back its efforts to sell accessories, such as 20-inch wheels, that Honda doesn't offer.
"We were preloading them (installing them on unsold cars) at the time," said Anton Pfeffer, parts manager at Penske Honda. "We had some issues. We couldn't get the factory to back us up" with warranties.
By contrast, Honda's factory accessories come with the same three-year/36,000 mile warranty as the car.
Renick and Palm Beach Performance tell customers that certain modifications will void their warranties, and they require customers to sign waivers. They also don't include performance parts in a new car's financing.
By avoiding performance parts altogether, Prestige Ford sidesteps any warranty issues. That allows it to include aftermarket parts as part of the customer's new-car loan.
Success in the aftermarket goes beyond merely having the right parts on hand. A lot of it is simply Sales 101, says SEMA's McKoy. That is, the dealer must be aware of the local market, display the parts and sell them at a competitive price. Wade of Palm Beach Performance adds that it takes a commitment from the dealership's staff.
"You have to have the mind-set to do this in the first place," he said. "You have to have general managers and owners of the company all on the same level to do this, because a lot of people just don't want to get involved in it."