New car sales may get all the glory, but it’s through fixed operations departments that car dealerships gain the bulk of their gross profits. In a typical dealership, annual profits from vehicle sales are generally lower than profits from the fixed operations department. On average, a dealership’s gross profits breakdown for each department may look something like this:
- New Vehicle Sales = 5+%
- Used Vehicle Sales = 13+%
- Parts = 39+%
- Service = 70+%
Fixed ops accounts for about half of a dealership’s gross profits even though those departments only make up an average of 12% of a dealership’s revenue. Most dealerships would not be able to stay afloat without their fixed operations departments. However, many dealerships treat parts/service/body shop as its own separate entity. Failing to connect your sales and service departments could result in lost opportunities for building long-lasting relationships with repeat customers.
A 2018 Service Industry Study from Cox Automotive found that buyers who utilize a dealership’s service and parts departments after making a purchase were more than twice as likely to purchase their next vehicle from the same dealership. Fixed operations departments are vital to retaining customers and earning repeat sales, and should be included in your car dealership’s marketing strategy.
In this 60-Second Update, Cody has a few pointers on what you can do to grow profitability and productivity through fixed ops:
So, to recap, in order to maximize your dealership’s gross profits through fixed ops, here are a few things you may want to consider:
- Phone training for all frontline staff. Even though we live in a digital age, most transactions on the backend are still done over the phone.
- Focus on improving the sales skills of your service department. Include your service department in your sales training efforts and in daily sales meetings.
- Hire a full-time sales manager for your service department. Make this person a “bulldog” on your service drive, taking TOs, up-selling, and even selling new and used vehicles.
by Shea Posey, Senior Account Executive/Compliance & Co-op Specialist