Watch Out: Your Dealer Is In Trouble, And He Needs Your Money
Five years ago, car dealers throughout the country were hit hard by carmageddon. Now, they are about to get hit again where it really hurts: In the workshop, where the real money is being made. The auto sales collapse of 2008 winds its way through the years like a diet through an anaconda. While showrooms were empty five years ago, now it’s the service bays that are deserted.
Says a J.D. Power and Associates study quoted by Automotive News [sub]:
“The number of vehicles in operation that are 5 years old and newer will dip to 63 million this year, forecast to be the low point of the industry’s downturn and recovery, according to J.D. Power and Associates. Late-model vehicles traditionally represent the sweet spot for repair and maintenance work for dealership service departments.”
Why will this be more painful than empty showrooms? In 2011, the service and parts business represented 13 percent of overall sales for the typical dealership but contributed 72 percent of dealership operating profits, according to the National Automobile Dealers Association (NADA). Used car sales often contribute one third of the profits, new car sales often are loss leaders.
Dealer workshops would have no problem surviving the trough if they would have held on to owners of older vehicles. The servicing of older vehicles can be the most profitable part of the business, new vehicles on the other hand need less and less service. However, owners of older vehicles typically give dealer workshops wide berth.
If your car is out of warranty and still being serviced by a dealer, watch for serious upselling. They need your money more than ever.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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I think it's important to highlight the good guys as well as the crooks and nitwits. Back when you could buy a Saturn, I got excellent service, quality parts, flawless work, and low prices at the Saturn dealer in Santa Maria, CA (presumably it's still the same dealer selling GM brands there now). And when my VW Passat stranded me in the Los Angeles area, the VW dealer in Van Nuys actually beat my local trusted indie shop's parts & labor cost for the repair (and the indie guys honestly try to make me a fair deal). All indies are not the same, of course. At my local high-end indie shop, which has all the latest diagnostic doodads and Bosch-certified mechanics, the fast-talking owner has already charged you for dubious upsells before you realize what has happened.
Watch for upselling ? You're kidding, right ? Acura MDX, trans issues. Just under powertrain warranty. "Sir, you need a new torque converter" "that will be $2,400.00". "Really ? I'm under warranty". "oh, let me check". "you do that". Ten minutes later "oh, we looked again, you ARE under warranty". I'm sure that had I given them my CC# it would have been hit that day. This from the same dealer that wouldn't replace all six of my coils when I suffered unstable idle-but they did try, every time I went in, to sell me the $300 oil change, er, inspection. Meanwhile, my BMW dealer, a preferred forum whipping boy, has always done right, usually the first time. If I made cars, I'd not want to send them to inconsistent dealers-the lost clients will tend to blame the car as a POS. I'm officially done with my local Acura dealer, even for DIY parts. I did a sway bar end link and center link replacement, and even after a detailed conversation with the parts guy, he gave me the wrong links, which I only discovered after taking the car apart. Two wasted driveway hours, and when I went back, the guy laughed. Congrats, you just lost a customer who has a few more new cars in him.....
Just another reason to do it yourself. In fact it's something I enjoy doing, I find fixing cars in my off times relaxing. Not sure everyone else does.
On my GTI, I can do the oil change, not that I like to - so I tried an independant shop that was heavily praised by a co-worker. The owner seemed to know his business, and had the wall of happy customer letters out for all to see. Fast forward a hour, got a bill that was HIGHER than the dealer, used the wrong oil, charged me for every thing but toilet paper in the can. And then took another 10 minutes to reset the maintenance reminder (he was looking at the manual and scratching his head). I was beyond mad, I paid, left, went and got my own oil, VW filter and changed it again after less than 2K miles. Looking at the prices, my VW dealer (thank you Leith VW) will change the oil, top off the fluids and check stuff for about 15 bucks more than I would pay to get the oil-filter myself. For 15 bucks, I'll skip the driveway hassle and help myself to a couple cups of dealer coffee.