Since launching SERVICEiQ (now part of TRADEiQ) in late 2021, FRIKINtech has been hard at work hunting for service customers to deliver a trade or street-buy offer.
Aside from the fun of engaging the HIGHLY engaged service customers, we have learned quite a bit from these repair orders, and I figured I would share some of that with you.
Service used to work with 7 customers for every deal the sales department did in a month. Since the pandemic changed everything in the sales department, the ratio has grown to 9 ROs for every 1 sale. We anticipate this ratio changing again once the vehicle affordability issues have subsided.
I was surprised to learn that only 9.1% of repair orders are fully covered under warranty. During my dealership days, it seemed service was nonstop complaining about how much warranty work was always being done. By the way, 16% of ROs were partially covered by warranty.
As of yesterday (July 29th, 2024), the average customer’s out-of-pocket expense is $521, including services with partial warranty coverage.
The last four years have been incredibly altering for the car business. Remote work’s popularity, combined with the staggering increase in new vehicle prices, has not driven the desire to replace vehicles as often as Americans were once doing. We have been seeing a steady aging of vehicles on the road. As I write this, the average vehicle is 12.5 years old.
It has been hard to get service work done at local dealerships in my market. A Ford store a few towns over told my wife they weren’t servicing vehicles from people who bought their car from another dealership. The nearest Ford dealer is currently scheduling 6 to 12 weeks out, depending on the service. Mercedes and BMW were difficult to book as well. The labor shortage for skilled mechanics is a major driver, causing labor rates to increase.
We tried to keep a paid-for 9-year-old Mercedes rolling, but the time it took to repair something made the inconveniences scream for a replacement vehicle. Even though, financially, the cost of repairs was far less than taking on monthly payments for a similar vehicle, our situation is similar to many friends who are willing to pay a little more for convenience. You never know what will make a customer part with their car. You just need to ensure you’re on their mind when they do.
I like to feed my gut with data and find a good mix of the two that informs my decisions. In the case of what I have seen from 6 million repair orders, I think there are a lot of people holding onto something they’d prefer to replace. Whether it comes from incentives or more new cars that hit an affordable price point, it will take a little time to inform consumers that the market has shifted back in their favor. In the meantime, smart dealers should be doubling down on providing a better customer experience during the ownership phase (AKA service), so they can reap the rewards that will follow when customers begin trading more frequently again.
