TOP 3 Key Performance Indicators for Car Dealer Aftersales Departments

TOP 3 KEY PERFORMANCE INDICATORS FOR CAR DEALER AFTERSALES DEPARTMENTS

19/02/2018

Are you measuring your dealership’s aftersales department KPIs? If you usually rely on your gut feeling and guesses to estimate that performance, you are among some 70% of service managers who do the same, as our experience shows. Aftersales revenue is the key to building a healthy foundation for the dealership business.

Here are three operational KPIs to help you understand how robust and efficient your aftersales department is. 

 

1. AFTERSALES ABSORPTION RATIO

 Car Dealer KPI Aftersales absorption ratio

The Aftersales absorption ratio shows a dealership how much of the company’s fixed costs are covered by aftersales revenue. In other words, it tells you what is going to happen when you suddenly stop selling cars or sales slow down.

Let us first examine how a company should determine the absorption ratio. The KPI is calculated by dividing all aftersales profits (both parts and labor related) by the costs they cover, including all fixed and semi-fixed expenses such as rents, salaries, and IT expenses.

Dealerships often aim for higher than 80% aftersales absorption ratios, most likely to survive a poor sales period.

A low aftersales absorption ratio indicates that it is time to start increasing your aftersales revenue by, for example, upselling on open jobs, campaigns, and packages to keep the company’s business as stable as possible.

 

2. UTILIZATION

Dealer KPI Utilization

Utilization refers to the relation between the time a mechanic spends working on cars and the total time spent in the workshop.

For example, a mechanic might come to work at 7 a.m. and return home at 3 p.m., spending eight hours in the workshop. Further, the mechanic might spend 6.5 hours working on specific vehicle jobs. The rest of the time may be spent between service orders and breaks, waiting for parts, or other internal activities. Therefore, the utilization of this mechanic is equal to 81% (6.5 divided by 8).

Usually, efficient dealerships aim for a range of 85% to 95%.

Utilization shows us how well we have organized the workshop processes and how well our mechanics follow company standards. High utilization percentages indicate a well-organized team, good cooperation between the workshop and parts department, and highly efficient assignment of tasks.

 

3. PRODUCTIVITY

Dealer KPI Productivity

Productivity is the relation between the time mechanics spend to perform their jobs and the standard time provided by the manufacturer or the time the customer has invoiced.

For example, if the standard time for replacing a windshield is invoiced as 2 hours but the mechanic has completed the job in 1.5 hours, his efficiency is equal to 133% (2 divided by 1.5).

Dealerships often aim for a range of 110% to 150% to consider the performance of the mechanic as productive.

Productivity indicates the quality and skill level of the team. High productivity implies that the mechanics are well trained, properly equipped, and experienced.

Essentially, the KPIs of utilization and productivity allow the service manager to understand how much time the mechanics and the workshop have available to better plan how much time can be sold to customers coming for service jobs.

 

WHY DOES IT MATTER?

Let us take a look at the history of how markets have developed. Most countries have experienced their “peak of the golden era.” The economy is improving, and optimism has encouraged consumption. It is a profitable and easy time for dealerships’ business. However, there will come a period when the economy will slow down, and the first thing people will delay is buying a car.

There are two types of dealers when market conditions are changing: those who will survive and grow, and those who will vanish. When a market enters maturity and sales slow, it is crucial to keep a close eye on the aftersales department and start upselling there because it becomes a key area of revenue flow at such times.

What if your aftersales KPIs do not measure up to the benchmarks? We have a few tips in this blog post.

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