Now that fixed operations account for roughly half of the typical franchised dealership's gross profit —about as much as vehicle sales — it's understandable that dealers seek to make their service departments more efficient, and thus more lucrative.
But this year's edition of Cox Automotive's Service Industry Study identifies tough challenges to new-vehicle dealerships' fixed ops, along with opportunities for growth.
Cox researchers interviewed more than 3,500 consumers who had their vehicles serviced at a dealership within the past year, as well as more than 400 dealership employees who affect fixed ops decisions at their stores. Among the report's key findings:
1. Dealerships whose service departments operate on a single shift are approaching full capacity, with 90 percent of service bays in use at the largest dealerships.
A still-increasing volume of recalls is straining capacity, the Cox study concludes. Although recall work creates warranty business and attracts new customers, a lack of available parts is hampering dealerships' ability to complete recall jobs. Half of the largest dealerships are scheduling overtime to handle high demand.
2. Most consumers assume the service department at the dealership where they bought their vehicle will charge more for service than aftermarket competitors — even when they don't.
The selling dealership typically charges $61 for an oil change, according to the Cox report. That compares with an average of $58 at a retail service provider, $60 at a quick-lube store, $75 at a tire store or repair chain store, and $77 at a typical service station or general repair facility.
3. Consumers will drive farther to buy a car or truck at a dealership than they will to get their vehicle serviced there.
While nearly half of consumers in the Cox survey said they would travel 11 miles or more to purchase a vehicle, fewer than one-third said they would drive that far for service. But two-thirds of dealers said they don't see that disparity as a major reason for losing service customers.
4. Customers who have to wait more than about 2½ hours at a dealership for vehicle maintenance or repair are much less likely to return for future service.
The most satisfied customers have a wait time of 2.4 hours or less. A wait time of 3.7 hours or more is likely to cause a consumer to vow never to go back to the dealership for service, the study finds.
5. Customers don't care as much about the higher quality of service at a dealership as dealers think they do.
The consumers surveyed by Cox Automotive said value is most important to them when they choose a service provider, ahead of quality, convenience and trust.
While more than three-quarters of dealers said a knowledgeable and courteous service staff is a critically important attribute, only half of consumers agreed. Just three of 10 service customers continue to come to the dealership for service once their vehicle warranties expire.
Other takeaways from the Cox study are more encouraging for the future of dealership fixed ops:
1. The number of service visits to dealerships has risen by nearly 10 percent since 2015.
That increase has contributed to profits as well as service customer loyalty and retention, the report concludes. Dealerships are taking market share from aftermarket quick-lube and repair outlets, and are performing more services during the typical visit.
2. Three out of four customers who have visited a dealership for service within the past year are likely to buy their next vehicle there.
That compares with only about one-third of vehicle owners who go elsewhere for service, the study says.
3. Dealership service customers are increasingly receptive to coupon and loyalty programs.
The percentage of customers who say such programs are important to them rose from 23 percent in 2015 to 28 percent this year.
4. As vehicle technology becomes more complex, dealership service departments will have a competitive advantage over other repair providers.
Nearly two-thirds of owners of vehicles with advanced features who were included in the Cox study said they prefer the dealership to service their car or truck — twice the rate of those who opt for general repair facilities.