A recent article in Automotive News confirmed what many dealership owners already knew: The gross profit per vehicle sold has fallen closer to pre-pandemic levels. At the same time, expenses have increased by more than 20% compared to pre-pandemic figures. Given these realities, it’s easy to assume that maintaining net profits is no longer feasible. However, by shifting our focus to fixed operations — the backbone of any dealership — we can still restore profitability.

With over 22 years of experience working with dealerships, I’ve observed some best practices in fixed operations that have made a significant impact on a dealership’s bottom line. The following are several key strategies that can help improve profitability in this crucial area:

1. Manage Receivables Carefully
   Establish clear, consistent policies for extending credit to customers and ensure these policies are strictly enforced. Service and parts managers must stay informed about past-due accounts and warranty claims. Proactive management of receivables will help maintain cash flow and reduce the risk of bad debt.
2. Manage Open Repair Orders
   I’ve encountered many instances where repair orders remain open after the work is completed — either to circumvent credit policies or absorb policy-related work into expenses. If a repair order is open, the related revenue and expenses are not reflected in the financial statements. Close out repair orders promptly to ensure proper accounting and more transparent financial statements.
3. Communicate Effectively with Service Customers
   While it’s true that some customers are skeptical about the need for additional repairs, many rely on their service advisors and technicians to identify potential issues. If your team isn’t proactively identifying and communicating necessary repairs, you’re missing opportunities for upselling and risking customer dissatisfaction. Clear communication helps build trust and increase revenue.
4. Negotiate Warranty Reimbursement Rates
   It’s important to regularly review and negotiate warranty reimbursement rates with manufacturers. West Virginia franchise laws are strong in this area, but manufacturers will push back. Know the laws that protect your rights and know your manufacturers’ policies. Additionally, continuously evaluate your customer labor rates to ensure they remain competitive while still protecting your profitability.
5. Implement a Credit Card Surcharge
   One often-overlooked way to improve profitability is by implementing a credit card surcharge. This can help recover the processing fees associated with accepting card payments. However, make sure to comply with all applicable laws. You cannot charge customers more than the processing fee itself, and you must clearly disclose the surcharge before the transaction is completed.
6. Leverage Your 20 Group
   Throughout my career, I’ve seen the positive impact of sharing best practices among dealerships. Being part of a 20 Group — a group of dealership owners and managers who meet regularly to share experiences and insights — provides invaluable opportunities to learn from others. Use your 20 Group to exchange ideas on fixed operations, gain new perspectives and learn from both successes and mistakes.

Remember, all hope of maintaining profits is not lost. By implementing best practices in fixed operations, dealerships can still boost their bottom line and maintain profitability. Take a look at the strategies just discussed and determine which can be implemented in your dealership today.