Dealers miss out on £461m of red work each year

Franchised dealers are missing out on £461m worth of revenue by failing to sell red work identified during customer vehicle health checks.

That’s the conclusion of automotive industry consultancy BTC, which recorded information from 500 dealers in 2015 using its electronic vehicle health check system.

Across the UK’s 4,900-strong franchised dealer network, this equates to £94,084 of lost sales per dealer.

Dealers sold an average of just 56.6% of urgent Red work, such as severely worn or illegal tyres and faulty brakes.

This equated to £42.19 of unsold red work per vehicle health check and an annual total of £47 million across the sample. On a national scale this means £461 million of lost sales per year.

BTC chief executive Guy Allman said: “The failure to sell Red work continues to be a major missed revenue opportunity for franchised dealers. When you consider that after sales departments typically contribute 50% of a dealership’s annual profits, this is a significant problem that needs addressing.

“Red work is identified as faults that if not addressed pose a serious safety risk and in many cases will mean the owner will be breaking the law if they continue to drive the vehicle. The fact that dealers are only persuading customers to address these issues 56% of the time also raises a major duty of care question, with the threat of potential legal action another concern.”

The problem of missed aftersales revenue is also being compounded by an increasing failure of dealers to complete health checks on vehicles presented to service departments.

The average completion rate fell from 78.2% to 73.3% in 2015 and with the average amount sold per health check at £70.49, this now equates to a further missed revenue opportunity of £105,973 per dealer, £62.7 million across the sample and as much as £519 million nationally.

Allman added: “Despite the fact that vehicle health checks are a proven way of generating sales and demonstrating a level of service to the customer, many dealers are letting this opportunity slip away.

“Today’s franchised sector is under intense pressure from rapid fit alternatives and the issue of business retention is critical. Once a customer is lost, it is extremely difficult to bring them back.

“Dealers must use vehicle health checks as a way of developing their customer relationships and differentiating their level of service from that of their competitors.”