This post was originally published on Auto Success
The Untapped Potential of the Service Department
Post COVID, the automotive industry has seen a shift in dynamics. New vehicle inventories and days’ supply are steadily climbing, yet the real growth story lies in service and parts sales. Over the past four years, these areas have collectively surged $25 billion nationally, accounting for an impressive 50% increase since 2020.1
Fixed operations — service, parts and body shop — are increasingly contributing to dealerships’ bottom lines, with their share of total sales growing year over year.1
Leasing trends further underscore the importance and potential of fixed operations. In 2024, over 25% of vehicles on the road are leased,1 driving a steady flow of warranty service work into dealership service bays.
Concurrently however, advertising expenses for dealerships have risen,1 and the cost to attract and retain talented service techs has risen, underscoring the need to bolster profitability through fixed absorption.
The service department is perfectly positioned to become a dealership’s growth engine, especially when paired with a tailored warranty reimbursement strategy.
How Can a Tailored Warranty Reimbursement Strategy Help?
A customized and proactive strategy outsourced to an expert in the warranty reimbursement space can yield substantial, long-lasting benefits for dealerships. Here are some key reasons why:
Expertise and Knowledge: A third-party vendor specializing in warranty reimbursement submissions stays up to date on state law, best practices and OEM guidelines and typical OEM roadblocks.
Compliance Assurance: A strategy tailored to your dealership will ensure submissions are accurate and compliant with state law and OEM policies, thereby reducing the risk of rejected submissions or lower rates.
Improved Profitability: Tailored strategies identify underperforming areas and uncover unique opportunities for your dealership to maximize reimbursement rates.
Focus on Customer Service: With your submissions handled externally, your fixed ops team can focus on delivering excellent customer service and maintaining relationships with clients.
Increased Cost-Effectiveness: The cost of outsourcing is often greatly outweighed by the increased reimbursements and the reduced overhead of managing the processes internally.
Maximum Results: Once you’re ready to submit, ensure your rate is both justified and maximized through thorough analysis. Running control checks, reviewing historical data and leveraging specialized expertise can amplify the effectiveness of your submission. These efforts not only ensure compliance but also position your dealership to achieve the highest possible reimbursement rate.
Looking Ahead
The service department is no longer just a support function — it’s a growth engine. By leveraging and strategic planning, dealerships can unlock the full potential of their fixed operations and drive profitability for years to come.
1: NADA 2024 Mid-year Report
