Dealers Could Focus on Independents' MarketPosted 7/18/2003
By Denise Caspersen
A well-cited statistic within the automotive mechanical repair sector is that 70 percent of vehicles are taken to independent service businesses for repairs following expiration of their warranties.
According to the National Automobile Dealers Association (NADA), 2002 saw nearly $16 billion generated in parts and service sales from warranty repair. This is down slightly from a total of $16.1 billion in 2001.
The changes came from a reduction of 3 percent in warranty parts sales and an increase of 2.3 percent in service sales, for an overall reduction of 0.7 percent.
As parts quality and reliability continue to increase, reductions in the amount of warranty revenue generated by dealerships are projected to continue.
According to a report from J.D. Power and Associates, the number of people who returned to dealers with warranty claims dropped 10 percent in two years. Considering that warranty repair accounts for 5 percent to 25 percent of a dealer's profit and coincides with dropping vehicle sales, the decline can be a real concern for a dealer.
As warranty repair decreases, dealerships will look for new revenue streams and ways to increase the amount of monies generated by their current operations.
That 70 percent of off-warranty vehicle repair market now enjoyed by independent shops could be a tempting place for dealerships to focus their energy.
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