With dealer margins continuing to face pressure, Jo Selby, National Sales Manager for AutoProtect, comments on the missed opportunities in aftermarket sales.
Recent figures published by ASE showed the average car dealership recorded a monthly loss of £384 compared with a £5,000 profit made in the same month last year. The finger of blame is often pointed at the pressures of pre-registration but the figures can be opaque.
But what is clear is that margin gains continue to improve in aftersales thanks to improved efficiency. Margins on car parts sit around 22 per cent and service gross profit on labour at just over 75 per cent.
Dealerships are often geared up to sell new cars, with used sales coming second on the list of things to sort out, and servicing a distant third.
Dealers are having increasingly complex relationships with customers. Often the finance company owns the customer relationship and is the first port of call for motorist’s queries. Leads and contacts come from manufacturer databases, and can lack the personal data that is so important for building a relationship.
Servicing can provide a platform to build a closer relationship with customers, and a relationship that will support vehicle sales and recurring, profitable, servicing revenue.
The use of service plans allows dealers to manage their customers through an effective contact system and accurately plan service revenue up to five years ahead. In a period when margins are tight, this revenue could be the difference between a profit or loss in a particular month.
A strategic approach is needed to ensure that all departments in a dealership work together to drive sales. How often are service customers offered a test drive of the latest model? Or customers offered the chance to future proof their servicing costs against the threats of the latest budget?
Return on sales for the average dealer is down in the rolling year from 1.52% to 1.27% with the average dealer site now £27,000 behind where they were in the first five months of 2014.
The ability to forecast service revenue in this situation will support a more robust financial projection that is vital to supporting the borrowing that goes with funding a new and used car sales cycle.
It is time that aftersales is given equal billing on the management agenda. It is fundamental to a holistic approach to driving sales across the P&L and providing a more accurate view on revenue.