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Aging Drivers, Vehicles Threaten Service Profits

New research indicates that aftermarket service chains are nabbing the largest share of service business, and an aging fleet and customer base continue to threaten dealership service profits.

April 2012, F&I and Showroom - Feature

by NA

An aging customer base and the record age of vehicles on the road today are threatening dealership service profits, according to a new white paper released by DMEautomotive, a Daytona Beach, Fla.-based dealer marketing firm. The opposite is true for independent shops and aftermarket repair chains, the latter of which now accounts for the largest share of service business.

In “The Changing Service Loyalty Landscape,” DMEautomotive surveyed 4,000 U.S. vehicle owners and found that aftermarket chains are capturing the younger wave of customers, with about half of the segment’s most loyal customers falling into the 25-to-34 age bracket. Conversely, customers who described themselves as “loyal” to dealers were likely to be 60 years of age or older, and nearly half were 50 or older.

And with a significant percentage of the dealer segment’s core customers poised to exit the market, the company warned that its findings could have troubling implications for dealership service departments.

“The dealership service center is becoming a veritable senior center,” said Doug Van Sach, vice president of strategy and analytics for DMEautomotive. “If dealerships don’t replace their aging loyalists, and aftermarket stores are successful in retaining their loyalists as they move into their prime spending years, a share-of-wallet sea change is looming that would greatly favor aftermarket stores.”

Currently, the dealer segment’s core customer base drives 62 percent of its $78 billion service business. If dealerships lose and fail to replace their over-75 customer base, they could stand to lose $310 million in service business, according to the white paper. If the segment doesn’t replace customers over the age of 70, dealerships could be hit with a $3.4 billion loss in business.

The aging fleet of vehicles on the road today also is taking a toll on dealerships. DMEautomotive’s analysts identified a major dealership defection for “bread-and-butter” maintenance work such as brakes, battery and tires. Less than half (45 percent) of vehicle owners surveyed said they’d take their vehicle to a dealership for those core services, even within the first two years of ownership when the in-warranty dealership relationship is still strong.

And when vehicles hit three to six years of age, dealerships lose, on average, 47 percent of that initial business, with only 31 percent of owners saying they would select a dealership for core service work, the report concluded. By seven years or more, only 13 percent of customers said they’d select a dealership for those services.

“This white paper explores many serious, often surprising, shifts underway in the U.S. service market, where more than three in four customers and 42 percent of dollars are currently in play,” Van Sach said. “And the ‘graying’ dealer loyalist base and vehicle population are two distinct forces poised to further color the market-share picture.”

Comment

  1. 1. HOWELL CLARK [ May 08, 2012 @ 03:43PM ]

    WITH DEALERSHIP LABOR AT 90-120 BUCKS AN HOUR AND OUTSIDE SHOPS 50-70 ITS NOT ROCKET SCIENCE.

 

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