automotive

Dealerships Losing Younger Customers

Auto dealerships rely on their service bays for incremental revenues. Whether for repairs, upgrades or customization work, dealership service is a $78 billion market. But a new study suggests younger consumers are favoring quick-service chains over dealership service, whose loyalists are an aging population. 

Auto consultancy DMEautomotive, in its white paper, “The Changing Service Loyalty Landscape,” a review of the $215 billion U.S. auto service market, says there are two “forces of graying” favoring aftermarket chains’ service profits to the detriment of new car dealerships.

First, dealership service centers are becoming “senior centers” as younger consumers favor aftermarket chains, per the report. Second, the age of the U.S. vehicle fleet is also benefiting independent stores and aftermarket chains, while taking its toll on dealerships because dealerships lose 47% of the warranty service when vehicles are three years old or older.

advertisement

advertisement

Forty-five percent of Americans polled said they are likely to visit the dealership for basic services even within the first two years of ownership, when the in-warranty dealership relationship is still strong.

And as vehicles hit 3-6 years, dealerships lose 47% of that initial business, with only 31% reporting they would use dealerships for these services. By 7 years, only 13% of customers will select dealerships for these services, per the survey, which also says independents and aftermarket stores grab significantly more “core” service business at vehicle-age three -- much earlier than many dealerships may imagine.

The study, based on a survey of 4,000 U.S. vehicle owners, says loyalists drive 62% of dealership revenues. But the study found that about half of aftermarket chains loyalists are under 34, while around half of dealer loyalists are 50 years old or more.

Dealership loyalists from the over-70 segment exiting the market would represent a $3.4 billion loss. The report also shows that dealership loyalists are more likely to be over 60 than any other loyalist group. Over a third of those most likely to be disloyal to a dealership service center are between the ages of 25 and 34.

“If dealerships don’t replace their aging loyalists, and aftermarket stores are successful in retaining their loyalists as they charge towards their prime spending years, a share-of-wallet sea-change is looming that would greatly favor aftermarket stores, while eroding dealerships’ lifeline service profits,” said Doug Van Sach, vice president of strategy and analytics at DMEautomotive, in a statement.

Next story loading loading..