Lexus Leads J.D. Power's Service Index

by Karl Greenberg, Feb 25, 2009, 3:51 PM

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Lexus is the leader in J.D. Power's latest Customer Service Index. The yearly study gauges how pleased new-car buyers are with their auto dealerships' maintenance and service in the days and weeks after purchase or lease.

Although Lexus saw 2008 sales plummet over 32% last year, the good news even in this economy is that Lexus dealers have some financial wiggle room against sales declines. Per the firm, the highest-performing brands in the study kept over 80% of their maintenance and repair dollars within their dealer network, compared with retention rates of less than 60% for lower-performing brands.

Jon Osborn, research director at the Westlake Village, Calif., company, says dealers are now relying even more heavily on the service-ops side of the business.

"The buck starts at the dealership," says Osborn. "For dealers, service and parts revenue is the only real money they are making these days." He adds that the sales drought now also means fallow service business later. "When they are not selling new cars, that almost guarantees lower volume of service in the future--certainly during the warranty period. It has a long-term effect. But given that, dealers who provide high levels of service satisfaction retain service in the future beyond the warranty period."

Osborn adds that the less tangible benefit for both dealership and the automaker is dealership and brand loyalty, and more customers. Not only do customers feel better about the dealership--and by extension, the brand (think Saturn)--they also talk about it to anyone who will listen, and those who listen remember the brand as much as the store.

"People who are getting truly exceptional experience are more likely to recommend that dealer, buy another vehicle, and feel better about the brand. The dealership is the main touchpoint manufacturers have with the customer. They are almost the only proxy."

The study, based on responses fielded last fall from 106,059 owners and lessees of 2004 to 2008 model-year vehicles, looks at how satisfied owners are with the service department of the dealership when they go for maintenance or repair work in the first three years of ownership. Those three years are, per J.D. Power, the average warranty period--and therefore the time in which most of the work gets done.

Those automakers whose dealers provide the highest levels of satisfaction during the warranty period retained 79% of dollars spent on maintenance and repairs during the first five years of ownership, per J.D. Power. By contrast, brands that scored low retained only 69% of customer maintenance and repair dollars.

Lexus ranks highest in customer satisfaction with dealer service in 2009--improving from fourth rank position in 2008. The other brands among the top five in the study are, in order, Jaguar, BMW, Cadillac and Acura. Osborn says Jaguar was No. 1 the prior two years. "Luxury brands tend to perform better in service experience; in fact, eight of the top ten brands are luxury," he says.

Among non-lux brands, GM's Buick and Saturn were within the top ten this year, which is usual, Osborn says.

He says there are several practices that the highest-ranked brands consistently perform that help elevate customer service satisfaction levels, including providing prompt service appointments; greeting the customer immediately on arrival; knowing the vehicle's service history; returning vehicles to customers in a clean condition; and offering alternative transportation to customers leaving their cars for service.

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