After the Warranty Ends

It's fairly easy for auto dealerships to keep service-department customers while their vehicles remain under warranty.

The hard part is retaining them as customers after the warranty expires and they're now paying for service and maintenance work. That's when many customers take their business elsewhere, such as independent repair shops.

But a study finds even though satisfaction with dealer service tends to decline as vehicles age — particularly in the fourth and fifth years of ownership — dealers that provide the highest levels of satisfaction during the warranty period retain a greater share of future business afterwards.

Dealership networks with superior service retain more than 80% of customer maintenance and repair dollars, according to J.D. Power and Associates' 2009 Customer Service Index Study.

Conversely, retention rates are less than 60% for brands with lower-performing dealers.

There are two reasons service work has become particularly important for dealers and their parts-supplying auto makers.

One, during the current recession, customers are keeping their vehicles longer, increasing the likelihood of service visits. (See story on following page.)

Two, dealers facing an industry-wide vehicle sales slump are turning their attention to other areas of their business, particularly the back shop, for much-needed revenue.

“The significant decline in new-vehicle sales means that dealers are relying even more heavily on the service operations,” says Jon Osborn, J.D. Power's research director. “In many cases, this income is keeping the dealerships open.”

Customers who say the dealer service they received was “unacceptable” report spending eight times as much at non-dealer service facilities, compared with customers who report receiving “truly exceptional” service from their dealer.

Consumers participating in the study report spending an average of $310 annually on oil changes, routine maintenance and repairs during the first five years of vehicle ownership.

In the latest study, the Lexus brand ranks highest in customer satisfaction with dealer service, improving from fourth place last year.

Lexus achieves an overall CSI score of 835 on a 1,000-point scale and performs particularly well in four of the five measures. In order of importance those are: service quality, service initiation, service advisor and service facility. The fifth measure is vehicle pickup.

Rounding out the top five nameplates are Jaguar (810), BMW (808), Cadillac (806) and Acura (805).

At the bottom of the list are Volkswagen (725), Kia (724), Nissan (723), Mazda (716) and Suzuki (702).

Newport Lexus in Newport Beach, CA, is an example of a dealership with a service emphasis.

The $75 million, 3-year-old facility is a showplace but Greg Whetter, vice president of the dealership group that owns it, talks with particular enthusiasm about the service department.

There is a 7-lane service drive for speedy intake. Cars go up a ramp and to a work area with 77 bays and 103 lifts. The bays are pre-stocked with parts for the 18 most common service orders.

“We can get you in and out in minutes,” Whetter says.

“The highest-performing brands differentiate themselves particularly in the service-quality and service-facility measures,” Osborn says.

The study indicates that what happens in the back shop doesn't stay in the back shop — it can affect whether a customer buys another car of that brand and from that dealer.

“Since dealer service is the last touch-point in the vehicle ownership cycle that auto manufacturers have with customers, providing superior levels of service can leave owners with a lasting favorable impression of the brand,” says Osborn.

Practices the highest-ranked brands consistently perform include: providing prompt appointments; greeting the customer immediately on arrival; knowing the vehicle's service history; returning vehicles in a clean condition; and offering alternative transportation if customers leave their cars for service.

These courtesies may seem intuitive, but many dealers do not consistently provide them, Osborn says.

The study is based on responses from 106,059 owners and lessees of '04 to '08 vehicles.