It’s no secret to dealers that the fixed or back end operations (service/parts/body shop) are critical to their success. The pandemic has affected all these departments. Many consumers are working from home, traveling less often, and for shorter distances. This means that there is less wear and tear on vehicles and a delay in scheduled maintenance due to fewer miles driven. Let’s look at it by the numbers.
Service Department
- Approximately 90% of dealers reported a drop in service sales dollars.
- 12.87% – The average percentage decrease in service sales. This contrasts with a 12.55% increase in 2019.
- As expected, nearly 86% of dealerssaw overall gross profit decline.
- Despite the decline in sales and gross profit dollars, gross margins remained at approximately 66% for both years.
Parts Department
- 88% – Percentage of dealers who reported a decrease in parts sales dollars.
- 13.13% – The average percentage drop in parts sales. 2019 reported an increase of 7.55% over 2018.
- Similar to service, dealers were able to maintain their gross margins, which, on average, stayed in the 33-34% range.
Body Shop Department
- Nearly all dealers with body shops reported a drop in business.
- 25% – The average percentage decline in body shop sales.
- Gross profit dollars decreased over 22%.
- On a positive note, dealers were able to hold their margins steady, averaging between 48-49%.
As mentioned previously, the current pandemic has hurt dealership fixed operations. Fewer vehicles on the road and concerns regarding personal safety while at the dealership have been the main factors driving the decline. Dealers rely heavily on fixed operations to generate profits to cover its operational expenses. It is incumbent for dealers to find new ways to market their fixed operation business to bring customers back into their stores. For those who have yet to do so, now is an opportune time to move towards appointment scheduling via their web site. Dealers may need to run promotions and specials to entice customers to schedule maintenance that has been put off, all the while providing the customer with explicit details on how the dealership has adjusted its safety measures to ease any fears they might have.
If you have any questions regarding this article, please contact Paul McGovern at PMcGovern@DowneyCoCPA.com or at 800-849-6022.
