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Why dealers charge more? Found some answers (long)


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3 replies to this topic

#1 Subarunation 713

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Posted 18 April 2005 - 03:45 PM

A few weeks back I posted a question as to why dealers charge more for service than good independents.
http://www.ultimates...=dealers charge

Last week I had the chance to talk to a retired Ford dealer.

Here are some things to consider as to why dealers charge more for service (these will not be true in EVERY instance but is a good rule of thumb).

Real estate. Compare the value of the real estate. This is a major reason. The dealer should be positioned in a high visibility high $$ area, the independent is usually not on the big buck main drag. Not all of the acreage is service but look at parking for service vs. parking for the independent. The dealer needs to be able to park at least 30 cars and trucks, the independent can park as few as 5? 7? but you get the idea.

Warranty repairs. The independent is not bogged down with warranty repairs. This can be costly if the car is in the shop and a factory tech must come out. Of course the shop is reimbursed for some of the cost but not for all of the lost opportunity that the bay or tech could have turned out. By the time this same item shows up at the independent enough dealerships will have stumbled across the problem that All Data will have something for the independent.

Factory training. Sending techs for factory training (this was mentioned by someone in my first thread). Hopefully the shop will recoup this expense by being able to perform better. But once again the lost opportunity and travel.

Parts inventory. Parts are more at the dealership because more parts must be inventoried and thus a higher individual parts cost (this is it's own kettle of fish) in the repair bill.

Specialty tools. This was mentioned by someone in my first thread. Multiple brand dealerships have multiple specialty tools. By the time the independent needs them Snap-On, MAC, Matco and the like will have the tool for less (God bless competition). Also if the independent will not be able to recoup the cost of a tool (2 jobs a year or less or whatever breakeven is) than they can turn the job down. The dealer does not have that option.

General overhead. Go to the dealership service area and look ALL around and go to the independent. A picture is worth a thousand words! I like my independent but I bring him coffee! He doesn't serve me :-) and we won't start on the bathroom!

Employee overhead. Service writers, parts department employees, cashier, service manager, janitor, etc. The independent will have some but not all of this overhead. To give you an idea of employee costs it has been reported (but I haven't read it myself) that Ford Motor Company spends more on healthcare insurance than it does on steel!

I was reminded of the value of dealer service. Think about this, how many of us put a higher value on a car maintained at the dealer? I know I do. I bought my 93 Legacy because Becker Subaru was able to produce all the service records for the car including oil changes and tire rotation from the day it was sold. I put a HUGE value on that. I would be impressed by a complete service record from an independent shop I know but what about a shop in Wherever USA that I don't know personally?

I wasn't trying to dog dealerships or techs in my first thread and I am not trying to dog them now. There are great dealerships and there are dealerships that would make a criminal blush.

There are great techs and there are crappy techs. Unfortunately for the dealerships most independent shops are former GREAT dealer techs.

I am sure there are more reasons and somebody could expound on each point for pages and pages but I thought I would share what I learned. I thank God I have the skills and tools to do what I can on my own cars regardless of dealerships or independents. It saves me $$$ and it's fun!

Greg

#2 SevenSisters

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Posted 18 April 2005 - 06:13 PM

All good points.

Next time you see him (her), ask what their gross profit is on parts and service.
I think a lot of members would be interested.

Thanks.

#3 Meeky Moose

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Posted 18 April 2005 - 07:27 PM

lemme add something.. price is not always about how long it takes to do a job, but how much the tech knows to do the job right the first time.. :) dealers normally know more things about thier brand of car they specialize in than an idependant..

my shop foreman could whupp me anyday when workin on a gm, ford, or dodge.
but give him a subaru and i could smoke him any day of the week, lol.. (he gets a littel aggravated when the service manager comes out and fixes the soob in half the time he could, lol..

#4 Setright

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Posted 20 April 2005 - 12:21 AM

All good points. They seem so obvious once they have been listed!




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