Fixed operations (parts, service, and body shop sales) have historically been a strong profit center for dealerships. Their profits absorb a significant portion of a dealership’s overhead. Fixed absorption ratios have declined in recent years as a result of the high gross profits realized on new and used vehicle sales.
Service Departments Show Growth
- Over 73% of dealers reported an increase in service sales dollars year over year. On average, the increase was approximately 7%.
- Comparatively, only 67% of dealers increased their gross profit dollars.
- Gross margins saw a slight decrease of .7%, dropping to 66.5%. Increased technician pay has outpaced labor rates.
Parts Departments Keeping Pace
- 87% – The percentage of dealers that increased parts sales.
- 11.28% – The average increase in parts sales.
- Gross margins remained consistently in the 33-34% range.
Body Shop Departments Doing Well
- On average 75% of body shops reported increased sales as well as gross profit dollars.
- The average increase in sales was a robust 17.6%.
- Gross profit percentages changed little and were in the 47% range.
Fixed operations has continued to show solid results in a post-pandemic world. The greatest challenge for dealers will be maintaining and acquiring technicians to accommodate customer demand. Another concern will be the lack of maintenance and parts required for electric vehicles. On a positive side, studies have shown that labor hours are higher on electric vehicle repairs.
If you have any questions regarding this article, please contact Charlie Paolino at CPaolino@DowneyCoCPA.com or at 800-849-6022.
