Service and Parts Departments Propel Auto Dealerships in Challenging 2025 Market
Detroit, Wednesday, 29 October 2025.
As vehicle ages increase, service and parts have become vital for dealer profitability, driving strategic investments to ensure long-term success amid declining vehicle sales.
The Rising Importance of Service Departments
In 2025, as the average age of vehicles on the road rises from nine to nearly fourteen years, auto dealerships are increasingly relying on their service and parts departments to sustain profitability during a challenging market period. This shift is driven by the fact that new vehicle sales have declined, leaving dealerships with overstocked inventories and increased overhead costs [1]. As a response, service departments have emerged as pivotal to maintaining financial health, offering a significant growth avenue amidst these difficulties [1].
Strategic Focus on Fixed Operations
The concept of ‘fixed operations,’ which encompasses service and parts departments, has become a beacon of opportunity for dealerships striving to achieve strong financial performance. Chris ‘Bulldog’ Collins, a renowned automotive performance coach, has emphasized the need for a strong fixed absorption strategy. According to Collins, focusing on fixed operations not only offers a short-term solution but also presents a ‘massive opportunity for the future,’ potentially leading to a 30-40% increase in net profit, which he describes as a baseline, not an anomaly [1].
Adapting to Market Dynamics
Dealerships are encouraged to innovate within their service departments to enhance customer satisfaction, service efficiency, and revenue optimization. This is crucial as dealerships face challenges such as differentiation amid pressures from Original Equipment Manufacturers (OEMs) for uniformity across stores [2]. The emphasis on customer experience is paramount, as fostering ‘raving fans’ rather than just ‘getting it done’ is seen as a pathway to increased profitability and customer loyalty [1].
Long-Term Sustainability and Customer Retention
Investments in service departments are not just about immediate gains. They are strategic moves towards long-term sustainability and customer retention. Experts argue that dealerships should continuously monitor and evaluate the performance of their Finance & Insurance (F&I) departments, adapting to rising interest rates and the availability of numerous products [2]. By focusing on fixed operations and customer-centric strategies, dealerships can better position themselves for future challenges in the automotive market [1].