When you think of the service department at a dealership, collision repair might not be the first thing that comes to mind. However, a significant number of franchised dealerships have embraced the collision repair business, for its potential to enhance profitability and customer retention.
According to the National Auto Dealers Association (NADA), approximately one-third of franchised dealerships have body shops, highlighting the growing prevalence of collision repair within the dealership landscape. Consultants and industry insiders emphasize the lucrative opportunities presented by collision repair, albeit with some challenges to navigate.
Mike Anderson, owner and president of Collision Advice, highlights four compelling reasons on Wards Auto why dealerships should consider establishing a road map for collision repair at their body shop:
1. Protecting the Franchise Brand
- By offering comprehensive collision repair services, dealerships can safeguard their brand reputation and provide customers with a one-stop solution for all their automotive needs.
2. Driving Parts Sales
- Body shops serve as a strategic channel for selling wholesale parts, leveraging repair opportunities to maximize parts revenue and profitability.
3. Boosting New Car Sales
- Providing collision repair services can lead to increased customer retention and loyalty, translating into higher new car sales and repeat business.
4. Enhancing Service Lane Revenue
- Collision repair contributes to service department profitability, bolstering the dealership’s overall bottom line and service absorption rate.
The financial opportunity of dealership body shops is significant, with gross profit margins reaching up to 48% and average repair costs totaling $5,000 per repair. Eric Frehsée, President of Tamaroff Auto Group, attests to the profitability of collision centers and highlights the role they play in fostering customer loyalty and impacting the vehicle ownership experience.
Certified by manufacturers such as American Honda Motor Co., dealership collision centers adhere to strict standards of service excellence and technical expertise. This certification not only instills confidence in customers but also provides access to manufacturer training programs, ensuring that technicians remain up-to-date with the latest repair techniques and technologies.
Collision centers contribute to new car sales and parts revenue, as evidenced by the success of Diehl Auto Group’s eight collision centers. Matt Whittenberger, the group’s Fixed Ops Director, emphasizes both the role of collision repair in customer acquisition and parts sales, and its value as a profit center within the dealership ecosystem.
There are some challenges to consider, including the shortage of collision repair technicians and the upfront investment required. However, with careful planning and strategic management, dealership owners can overcome these and capitalize on the opportunities presented by collision repair.
Dealership body shops offer an opportunity for enhancing fixed ops profits and strengthening customer relationships. By embracing collision repair as a core service, dealers can position themselves for long-term success in the competitive automotive landscape.
