The current economy has a significant impact on consumers, manufacturers, and ultimately the automotive industry. As economic conditions fluctuate, consumer spending habits and priorities change, affecting the demand for both new and used vehicles. It is now more important than ever for dealerships to adapt to changing economic conditions to remain competitive and profitable.

Slowing New Vehicle Sales and Fixed Ops Profitability 

According to data from the National Automobile Dealers Association (NADA), new vehicle sales in the United States peaked in 2016 at around 17.5 million units and have since declined to just over 14 million units in 2020.

Over the past decade, new car prices have also increased significantly due to advanced safety features, infotainment systems, and other technology. Recently, rising inflation has greatly contributed to the increase in new vehicle costs, making it harder for consumers to afford a new car, leading many to opt for used cars instead.

Despite the decline in new vehicle sales, Fixed Ops profitability has been increasing. According to a report from McKinsey & Company, Fixed Ops has become a more significant source of revenue for dealerships over the past decade. In 2018, Fixed Ops accounted for 49 percent of dealership gross profits, up from 45 percent in 2013.

Economic Impacts on Consumer Spending Habits can Benefit Your Fixed Ops Department 

One of the most significant impacts of the current economy on Fixed Ops profitability is the shift in consumer spending habits. During economic downturns, consumers tend to tighten their budgets, reducing discretionary spending on non-essential services and products.

This reduction in consumer spending can actually positively impact Fixed Ops profitability, as consumers hold on to their vehicles they already have instead of buying new. It becomes more important than ever to get their vehicles services regularly so they have reliable transportation to safely get where they need to go. 

In 2023, the average vehicle on the road will reach a record breaking 12.3 years old, compared to 11.9 in 2020 according to Hedges Company. This means that these older and higher-mileage vehicles are an excellent revenue opportunity for your service department! 

Capitalize on Existing Customers to Increase Revenue

As consumers are showing to be more likely to keep their current vehicles on the road longer, dealerships have likely already seen an increase in demand for maintenance and repair services. How should you capitalize on this opportunity? 

Dealerships can capitalize on this demand by promoting the importance of regular maintenance services and repairs to keep vehicles running longer. Dealerships that invest in their service departments and promote their expertise in repairing and maintaining high-mileage vehicles are likely to benefit from this trend. Dynatron Software offers a suite of solutions designed to help your Fixed Ops department become more efficient and more profitable. 

Maximize Fixed Ops Profitability Amid Rising Inflation 

Higher costs for businesses and consumers and can have a significant impact on Fixed Ops profitability, especially through increased costs for parts and labor. As the cost of raw materials and other inputs increases, suppliers are forced to raise their prices, which can increase the cost of parts for dealerships. 

In addition, inflation can also lead to the need for higher wages for technicians, which can increase the cost of labor for dealerships. These higher costs can put pressure on fixed ops profitability, as dealerships can struggle to pass on these costs to customers through higher prices.

Despite the challenges posed by inflation, there are several strategies that dealerships can adopt to maintain Fixed Ops profitability. One key strategy is to focus on efficiency and productivity. By optimizing the time and skillsets of existing technicians, dealerships can maximize the amount of customers seen each day and ensure technicians are compensated to the fullest extent by reducing idle time. 

Another strategy is to focus on customer retention and loyalty. By building strong relationships with customers and providing exceptional service, dealerships can increase customer loyalty and generate repeat business. 

Focusing on efficiency and customer retention will help dealerships navigate this challenging environment and maintain profitability in the face of rising costs and shifting consumer behavior.

Increase Your Fixed Ops Profitability with Dynatron Software

The current economy has a significant impact on Fixed Ops profitability, with a plethora of opportunity available for the department to truly pick up the slack and maximize dealership revenue.

It is now more important than ever for dealerships to be prepared to adapt to changing consumer spending habits and priorities, fluctuations in demand for new vehicles, and disruptions in the supply chain. By providing value to customers and promoting the importance of regular maintenance services, dealerships can maintain and grow their Fixed Ops profitability even during challenging economic conditions.

Dynatron is dedicated to helping you make running your Fixed Operations easier and more profitable. Get in touch with us to learn more about the opportunities for your dealership!