As the franchised net-works continue to suffer from declining aftersales absorption, service plans must rank as one of the strongest tools for retaining car buyers as customers for the workshop.
But, some dealers with an already loyal customer base will question whether they should offer a discounted product for a customer who has been happy to return for servicing and pay full invoice.
AM recently polled franchised dealer executives on whether service plans were profitable for their business.
More than 80% said they were.
However, some have reservations about the longer-term impact of service plans if they require the dealer to discount their labour rate.
One dealer said: “Service plans mean a franchised dealer becomes differentiated on price and it’s pricing on the lowest level.
“It negates all arguments about service and price based on quality of care and that being a reason for a customer to come back. Is it a good business model for sustainable high margin business?
“If service is the most important part of the business for covering overheads should dealers be giving away work so cheaply?”
Industry trends suggest that franchised dealerships have been suffering a declining share of the UK’s service parc, exacerbated particularly by the last few years of low new car registrations.
Trend Tracker data shows the franchised sector’s share of all retail service, maintenance and repair (SMR) work had slipped from 23.3% in 2005 to 22.6% by the end of 2011.
Although franchised dealers have around 70% of the SMR market for cars up to two years old, at three years old this slumps to around 50% and quickly falls further as the cars age.
A recent Motoring.co.uk survey of 2,500 consumers in the market for a new or used car found that many still believe franchised dealers are too expensive for servicing.
Just one in four returned to the selling dealership for the car’s annual service.
Chris Green, sales director at Motoring.co.uk, said: “The major problem is that consumers don’t know that dealers and manufacturers are working hard to put servicing and MoT offers together and have deep misconceptions about price.”