Auto dealerships experience a massive drop-off in service and repair work following the end of a vehicles’ warranty. It’s a sudden and steep drop with devastating financial implications for auto OEM’s and dealerships alike.

Even the best dealership service departments are not immune.  According to Steve Finlay of WardsAuto, citing a J.D. Power and Associates’ Customer Service Index Study, customer retention rates for maintenance and repair are often less than 60% and only top dealership networks with superior reputations for service do better.

Carlisle and Company research shares similar results with one of their clients reporting up to 50% loss in customer loyalty on the day the warranty expires.

Why the Drop?

Soon after the sweet romance of the new car purchase in the flashy front showroom, owners are whisked away to the backroom service department for the rest of their auto ownership relationship. The experience they have in your service department over the following years has a significant impact on their loyalty and satisfaction.

Finlay again sites Jon Osborn, J.D. Power's research director: “Since dealer service is the last touch-point in the vehicle ownership cycle that auto manufacturers have with customers, providing superior levels of service can leave owners with a lasting favorable impression of the brand”.  Poor impressions damage brand loyalty and ultimately reduce future service revenue and new car sales. Customers simply seek out independent service shops or change brands all together.

Losing 40-50% of service business after the vehicle warranty ends suggests that dealers are not giving owners a lasting favorable impression.  

Why is post warranty revenue important?

In today’s tough economy, drivers are purchasing fewer new cars and keeping the cars they do have on the road longer. This has pushed the average age of a vehicle up to 10.8 years.  Savvy automotive OEM’s and their dealers have recognized the shift and are looking to that lost post-warranty revenue as a source of additional profits to offset fewer new car sales.

Both OEMs and dealers are eager to capture a larger piece of the post-warranty pie, which can add up to serious profits given the increased length of ownership.

So, what’s the issue?

Carlisle and Company is studying the challenge. Some of its preliminary findings are that customer expectations are not in alignment with the service practices of dealerships, which leaves everyone (the OEMs, dealers and customers) unhappy and probably a little bitter.
 
Carlisle identified the top 26 factors (grouped into 5 categories), which customers value most and compared that against what service departments offered. The results show that dealers aren’t stacking up.  “According to the customers, their business migrates to operations perceived as more trustworthy, easier to do business with, and lower priced”.

What can be done to earn more post-warranty revenue?

Auto OEMs and dealers can eliminate some of the gaps by understanding the expectations of customers and delivering what they want. One tool that has proven to accelerate repairs, increase quality and improve customer-dealer-OEM relationships is Enigma’s InService® EPC (Electronic Parts Catalog).  A well-executed EPC system streamlines the dealer’s diagnostic, troubleshooting, estimating, parts availability and ordering activities, which accelerates repairs, improves estimates and increases quality (first time fix). The right EPC also provides OEMs with on-demand analytics and dashboard reports so they can spot service trends faster, and minimize customer snafus before they become a recurring issue.

InService EPC makes it easier for dealers to communicate openly and effectively with OEMs and to answer customers quickly and accurately, which helps them build a long-term, trusted relationship.  

And as we’ve learned from the J.D. Power and Associates’ Customer Service Index Study, top dealership networks with superior service retain a higher percentage of maintenance and repair dollars.