Even through a global pandemic and record inflation, automotive profitability soared during 2022 and remains strong for 2023. Despite overall growth across the industry, many auto dealerships look for ways to maintain profitability in the face of ongoing operational and regulatory hurdles.
As the industry evolves, many auto dealers are working on ways to find strategic avenues for boosting and maintaining gross profits. One opportunity dealerships could consider is the addition of ancillary services to supplement auto sales and augment profits. Here are three lucrative ancillary services dealerships can utilize to drive profitability and increase value – all on their lot.
Two key factors have driven the profitability of car washes in recent years: market demand and environmental considerations. Market research indicates that younger generations more frequently utilize professional carwash and detailing services than older generations, suggesting a cultural shift (or lifestyle inflation) is driving demand and, therefore, increasing profits. Add that to the increase in disposable income spurred by the COVID pandemic and the consumer’s demand for fast, on-demand washing service, and it’s easy to see how car washes have remained a cornerstone in the auto economy.
Environmental restrictions and policies have surfaced in response to water usage and waste. At-home car washing results in a much higher volume of water and vastly increases the level of toxic chemicals and residue making its way into the surrounding environment. For this reason, many state and regional governments have placed stringent restrictions on at-home car washing and have implemented hefty fines for those failing to follow these guidelines. In contrast, federal law requires professional car washes to follow strict guidelines for proper drainage, treatment, and filtering of water runoff to ensure safe recycling back into the region’s water sources, making commercial car washes an ecologically friendly business with considerable potential profits.
The tax benefits of a car wash can also shorten the payback of such an investment. This and the fact that car washes compliment the business of a dealer, make car washes an attractive investment opportunity.
Body shops represent another profitably stable branch of the auto market. Given rising interest rates and vehicle prices, the average car owner is more likely to seek repair than endure another purchase. Not to mention, all cars, regardless of type, will require some level of maintenance or repair over time.
Collision repair necessitates dedicated equipment and a level of expertise outside that of the average consumer, making body shops the primary source of support for car owners. Although the industry anticipates EVs will require less ongoing service and maintenance than traditional motor vehicles, EVs utilize advanced technology and complex parts that require specialized skills to maintain and repair. In the long run, expert training and staffing increase the likelihood of more billable service hours and revenue per hour. Plus, “green repair” branding and certification is an opportunity to meet the consumer’s demand for environmentally responsible standards of operation and eco-friendly practices.
Despite dipping slightly during the pandemic, the towing industry bounced back remarkably quickly as the economy reopened in 2021. As businesses reopened and people returned to work, the need for tow trucks steadily increased as the influx of traffic and cars on the road led to an uptick in collisions, breakdowns, and parking violations. Regardless of motor type, tow trucks can transport any vehicle without the need for special parts or equipment.
Ultimately, towing requires minimal upfront investment outside of equipment and staff and is considered an essential service for personal drivers, municipalities, and private businesses to travel safely.
A successful dealership understands that the trust and relationship it fosters with its customers is crucial to success. While repeat customers are essential for vehicle sales and referrals, ancillary services can open new lines of revenue and offer vital services to an existing, loyal customer base.
Bart joined ARB in 1996 and is a Principal with the firm. The growth of ARB’s Auto Dealership Group is a natural result of consistently anticipating the needs of dealerships and providing savvy, sensible and customized services at fair prices.