Auto dealers have more opportunity than ever to build their service drive revenue as consumers hold onto their cars longer and longer, but increased competition and missed openings are eroding that business.
A Cox Automotive survey of dealers and auto consumers found 61% of consumers are keeping their vehicles five years or longer, up from 54% two years ago. Its poll of 2,500 people showed the average age of vehicles traded in or otherwise disposed of is 10 as 74% of consumers plan to delay purchases of new vehicles.
Though average auto dealer service and parts revenues are up by a third over the past eight years to $9.2 million, their share of service visits is down four percentage points to 29%, according to Cox, which estimates that just one lost service customer can cost a dealer an estimated $12,000 over time.
In fact, average service costs for consumers balloon between cars’ fifth and 10th years, from 20 cents per mile to $1.10, Cox said.
At least part of the reason for business decline is a growing number of auto service providers, up 12% since 2018 to nearly 300,000, including some mobile services, according to Cox.
Added to the competition is a lingering consumer assumption that auto dealer service departments charge more than independent shops. The survey found their average service expense at a dealership to be $261, compared to $275 at non-franchised dealer providers.
Still, Cox found 80% of new-vehicle buyers are likely to bring their cars back to the same dealerships where they purchased for service.
Dealers can increase fixed-operations business by making a car buyer’s first service appointment at the time of their purchase; sharing cars’ trade-in values with service customers; and providing photos and videos to customers during service visits, along with other digital touchpoints, such as online scheduling.
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