A nice Los Angeles listener called us wanting to use my car buying system, but it was quite a distance in heavy traffic. She didn't mind the drive to get a new car, but servicing was going to be a real problem. Besides helping people with auto advice on the CarProUSA Radio Show, I also recommend good dealerships from which to purchase. I handpick these, and I only have one or two dealers per brand, per market. That means that often, my listeners have to drive to get a great deal and have a good experience.
The truth is that dealers make a lot of money servicing vehicles. In fact, their service departments are way more profitable than their new vehicle departments in a huge majority of dealerships. Dealers don't advertise their service departments often, commissions and salaries are much less than sales commissions, and overall, the expenses in a service department are much lower than on the sales side. That means that for every dollar of sales in service, or in warranty revenue, much more of the sales dollar goes to the bottom line of the dealership.
What does this mean for the consumer? It means that a dealer has a lot of incentive to keep you coming back for service. Think about it, a dealer could see you dozens of times for service, but maybe once every five to ten years to purchase a vehicle.
Make no mistake, dealers are paid handsomely for doing warranty work. The factory usually pays the dealership its customary retail labor rate for performing warranty services, and also gives it a nice markup on any needed parts. The dealership is on your side when you take your car in for warranty work since in some markets, it is being paid $150 per labor hour to perform the work.
Smart dealers also know that if they take care of you on service, there is a chance they might sell you your next car. Dealership service departments are usually busy places, and most pay no attention to where you bought your car, they just want to take care of you and see you again. They also want to make sure that if you are sent a survey from the factory, you can honestly give them good scores.
Savvy dealerships realize that if they take really good care of you while doing warranty work, you will keep coming to them for routine maintenance. Today, dealers know what their competition is charging for routine services, like oil changes and tire rotations, and they strive to be competitive in both price and time spent at the facility.
I think it goes without saying that most dealerships would love to sell you a car and service it too, but more and more these days, people do one or the other. Over my years in the auto industry, I have seen great dealerships to buy from that had lousy service departments, and the complete opposite is true, too.
In summary, buying a car is a huge decision and a big investment. You want to purchase from an honest dealership that does not play games with you. Sometimes you have to drive a ways to do that. If this ends up being the case, have no fear of using a different dealer's service department, it will most likely work out just fine.
April 28, 2021