Every dealer and successful sales rep knows the thrill of closing a sale.
But as I was reminded during my latest class at the NADA Dealer Academy, it’s not the showroom that sustains a store — it’s service.
Fixed ops remains the most profitable area of a dealership. Yet many owners and general managers still don’t fully understand its potential. If you want to make it in retail automotive long term, you must be a student of the entire operation — and that includes the back of the house.
In fact, those beyond our industry don’t realize that the reason dealers can afford to operate and remain profitable is because of the money generated by service and parts. At Dealer Academy this month, it was made clear to up-and-coming leaders that a healthy dealership should aim for a fixed absorption rate — where service and parts profits alone cover all overhead expenses — of 100 percent or more. The national average for August 2025 was 63.9 percent (up from 61% in August 2024), though I know of a few Virginia dealers who achieve closer to 105 percent or higher.
Are you leaving opportunity on the table? Some stats I learned during my time at the Dealer Academy:
- 75% of customers will buy tires from the first person who recommends them, but only 8% of tires are sold at a franchise dealership.
- 86% of vehicles are out of warranty — and the same percentage of paid service work is done outside of a dealership. Warranty work provides a steady, manufacturer-backed revenue stream that keeps service bays full and technicians productive. Just as important, warranty is often a customer’s first post-sale experience with the dealership — a crucial opportunity to build trust and earn loyalty long after the warranty expires.
- The average salesperson selling 10 units per month has personal contact with up to 50 customers or prospects each month. One service adviser will deal with 10 times as many people in that same period.
Customers judge us by our service departments more than our showrooms. The service adviser is often the face of your business — shaping how customers perceive your brand and determining whether they come back after the warranty expires. Even simple factors like the availability or speed of Wi-Fi in the waiting area can deter customers from returning. (Don’t lose a customer to bad Wi-Fi, folks.)
Another source of lost revenue? The telephone. One study found dealerships lose about $1 million a year simply because they don’t follow up with customers who leave voicemails or get transferred incorrectly. Others hang up when left on hold. Frustration leads to lost business.
So, are the people manning your phones trained to get customers to the right place? Could you create a dedicated customer service role whose only job is to respond quickly and helpfully to phone calls?
If you’re a dealer principal or general manager without a fixed ops background, take time to learn. Attend seminars, join 20 Groups, or enroll in NADA classes. Even the best dealers must remain students of this business.
The car business has evolved dramatically since I started in 1979. What hasn’t changed is that those who keep learning, adapting, and investing in the fundamentals are the ones who continue to succeed.
Take the next step in your dealer education with NADA.
- Enroll in an upcoming NADA Seminar. Explore a range of topics and come prepared to analyze and discuss your dealership’s performance. You’ll walk away with the tools to make significant process improvements. Both in-person and live, virtual classrooms.
- Take a leap and join the more intensive NADA Dealer Academy. It includes either six one-week classroom sessions or six month-long live online sessions, once or twice a week, over the course of a year. The sessions are taught by industry experts, with hands-on practical application in each area of the dealership. Students will develop an end-to-end view of business and dealership operations.
- From sharing knowledge at 20 Groups to entry-level seminars to financial modeling, NADA has a variety of Education and Consulting offerings. Explore them.
