Small, independent business owners in the automotive services and repair industry are in a bind, a study shows. Funding is tight and many are considering getting out of the business.
The study covered independent mom-and-pop shops, not dealership-associated service shops, said Randi Haney, a spokeswoman for small-business insurance provider Hiscox, which conducted the study. As such, it offers insight into part of the competitive landscape that dealerships' fixed operations face.
The study involved more than 1,000 U.S. small- and medium-sized business owners. Other industries polled included business services, building/construction, financial services, information technology/media/telecoms/printing, catering, retail, marketing/communications and professional services.
Owners in the automotive services and repair industry, the study found, face several obstacles, especially when it comes to funding.
One-third of owners in the automotive services and repair industry consider their financial situation worse in 2015 than it was a year earlier.
More than half -- 56 percent -- of those owners are considering exiting their business by 2020. That number is 18 percent more than for any other industry included in the study.
Among the reasons for the high number of those looking to exit the industry:
- Little time off. Thirty-two percent of owners in the industry took nine or fewer vacation days, which was the least amount for any industry in the study.
- Tight financing. Thirty-three percent of those owners believed that the availability of bank funding for their small business has become more difficult in the past 12 months.
- Personal risk. Twenty-two percent of owners have remortgaged their houses to fund their businesses. Hiscox said this was 12 percent more than owners in any other industry surveyed.
According to the U.S. Bureau of Labor Statistics, both the number of independent shops as well as employees in the automotive services and repair industry has shrunk.
Since 2005, the number of private, independent mom-and-pop shops has dropped to 159,547 from 165,315, a loss of 5,768 businesses.
The number of employees in the automotive repair industry has also gone down to 863,888 in 2014 from 885,281 in 2005, or a loss of 21,393.
It's unlikely that those declines reflect less service work on vehicles. The average age of light vehicles in the U.S. has risen to an all-time high of 11.5 years, according to IHS, and older cars and trucks typically need more repairs and maintenance.
Dealerships haven't necessarily absorbed all of the mom-and-pops' lost business. Some of it may have gone to large auto-service chains such as Sears. But dealerships have continued to expand their highly profitable service business.
Comparisons are problematic because the National Automobile Dealers Association changed its methodology for its annual NADA Data report in 2015, effective for the report on 2014. Still, in 2014, an average dealership's service and parts sales totaled $5.6 million, up 5.2 percent from 2013 and 48 percent from 2005, according to NADA Data 2014.
The average dealership also wrote 17,070 repair orders in 2014, an increase of 22 percent from 2013 and 39 percent from 2005, and had 17 technicians, up from 15 in 2013 and 12 in 2005.