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6 Strategies to Increase Your Auto Dealership’s Profitability

To increase your dealership’s bottom line, first consider the profitability of your various departments: new cars, used cars and service drive. According to the National Automobile Dealers Association (NADA), new car sales account for 58% of total sales but only 26% of gross profit. Used cars account for 31% of total sales but nearly 25% of the gross profit. Ensuring that your used car inventory is ready to sell quickly and cost-effectively is one immediate way to increase dealer profitability. Even more profitable than used cars, your service and parts department accounts for, on average, a whopping 49.6% of a dealership’s gross profit. Maximizing profitability on used cars and your service drive really hold the key to increasing your dealership’s bottom line. We spoke to Jake Freedman, Marketing Director for Colors On Parade, a national franchise that works closely with auto dealers all over the country, to get an inside look at how simple changes to your marketing strategies and service offerings can maximize your bottom line, particularly with used car inventory and service drive. Here are 6 key takeaways that you can implement with no additional cost to your dealership:

1. Repair dents, scratches and dings immediately and cost-effectively right on the lot as soon as used inventory arrives. In a recent discussion with Colors On Parade, we learned, “many of our franchisees have mobile technicians based at car dealerships to make scratch and dent repairs of incoming used cars easy and affordable for the dealership. Many repairs can be completed same day, getting those vehicles ready for sale quickly.” In addition, minor touch ups and simple dent repairs completed on-site, as opposed to a body shop, do not need to be included on the Carfax, maintaining the resale value of the vehicle.

2. Gear a good portion of your marketing to owners of older cars through your service drive. Older cars provide a unique opportunity for your service drive. The average age of a car on the road has increased in the last 10 years from 9.6 years to 12.1 years. That gives your service drive a longer time to establish a positive relationship with customers that can benefit your bottom line.

3. Increase service-related visits by offering same day scratch and dent repair. Your service techs and service personnel can help customers easily remedy scratches and dents by offering them same day service available right through your service drive. “When you have a mobile dent and scratch repair service that can take care of customers same day for you, you build loyalty with those customers and repeat visits, adding to your bottom line each time,” Jake Freedman shared. Same day service is much more affordable and convenient, as most body shop work can take a week or weeks.

4. Drive sales loyalty using service loyalty. Customers who come to the dealership for regular service are 2.5 times more likely to buy their next vehicle at that dealership. Service loyalty has a direct relationship to sales loyalty for both new and used cars.

5. Treat your service business like a local business. Market to your existing customers and local customers to keep them loyal and keep them coming back. When you treat your service drive like a local business instead of a national brand, you give customers the small business feel that they are looking for. Also, customers within a 10-mile radius (or a 20-mile radius, max) are most likely to be loyal and repeat customers for your service business simply due to proximity.

6. Overcome customer cost concerns for service and repairs. Many customers believe the dealership is the most expensive place to have their vehicle serviced, when the reality is you can be very competitive and provide a superior customer experience. Addressing this mindset head-on is key. You can get ahead of this issue with valuable service offerings that save a customer time and money, transparent pricing, and emphasis on factory-quality parts and expert technicians.

Focusing on used car sales and your service and parts department is the best way to increase your dealership’s bottom line. With a few simple implementations to your marketing strategies and service offerings, you can enjoy increased profits almost immediately. Remember to hone in on the customer experience, increasing loyalty and repeat service drive touch points as well as getting that inventory ready to sell as soon as it hits the lot.