ome dealerships are using complimentary vehicle inspections to increase service work. “We are using the inspection process in a very professional and credible way,” says Erik Day, chief financial officer for Warren Henry Automobiles.
“We’ve seen customer-pay repair orders up 25% year-over-year, while we’ve seen a marked decline in warranty work,” he says. “We’re seeing a shift to parts and service where margins are much higher; up to 30% vs. single digits for most vehicle sales.”
The extra back-shop business is important to Day’s dealership group, which runs five luxury stores in Miami.
Many Warren Henry customers are affluent, but got burned in the Florida real-estate meltdown and ended up defaulting on second or third condo units bought as investments.
Their struggles became the dealerships’ struggles, Day says at a recent AutoTeam America conference. “It has cost us 25% of our car sales volume.”
Dealerships nationwide are turning to their back shops to make up for showroom loses.
Inspections help that cause because they often detect problems with a vehicle beyond what the owner reported in the first place.
A Car Care Institute Survey estimates 85% of vehicles on the road need some sort of service work. The Automotive Aftermarket Industry Assn. estimates $62 billion in potential auto repairs are driving around.
Dealers need to create an environment where inspections are the rule, not the exception, says Les Silver, chairman and CEO of MPi, a supplier of automotive diagnostic and repair information.
His firm developed an inspection program using computer software and hand-held devices that auto technicians use to check off inspection points on a mobile screen.
The finished product given to the customer is an easy-to-read report listing what is in good working order and what isn’t. The report includes recommended repairs and their costs.
Customers are told beforehand that the dealership will inspect their cars for free. Most customers give their OK. It’s inadvisable to surprise them with an inspection, Silver says.
For Cascade Auto Group in Klamath Falls, OR, a multiple-franchise dealership, the MPi system has resulted in more than $30,000 of additional monthly service income.
Cascade repairs 1,500 vehicles a month. About 96% of them are inspected.
The system allows management to track whether technicians are indeed doing the inspections.
“We always had a mandate that every vehicle should receive an inspection,” says Brian Lepley, Cascade’s service manager. “But we were challenged because there was no way for us to verify if the inspections were happening or not, other than thumbing through every RO (repair order).”
He adds: “As soon as the system went in, everyone became accountable.”
He has validated that more vehicle inspections performed results in more service recommendations, which lead to more upsells and a corresponding increase in service hours logged.
“Before we started this inspection system, we averaged 1.5 hours of work per RO,” Lepley says. “Now we average 3.5 hours or more per RO.”
He reviews technicians’ and service advisors’ reports at least three times per week. He tracks the number of inspections requested, the completion rate, recommendations per repair order, total value of inspections and closing rate on upsells.
“If the numbers aren’t where they should be, I can go talk to each individual and find out why,” Lepley says.
Dealership service departments sometimes get rapped for overselling. But ironically, “little is getting sold,” Silver says, referring to a lack of routine inspections at many dealerships.
Service advisors typically are mere order takers, despite their titles. But the MPi inspections allow them to give customers a report that explains what needs to be done and why.
The Know Your Vehicle report includes colorful pictures and diagrams illustrating good parts/bad parts. The customer feels more knowledgeable and more empowered to make a buying decision, Lepley says.
“As a service manager it’s gratifying when we see our customers return to our service department for work that needs to be performed,” he says. “Especially when they have a Know Your Vehicle report in hand that they received from a previous visit.”