3 Bold Predictions for Auto Dealer Service Departments in 2024

By Jim Roche –  February 2, 2024

As the automotive industry hurtles towards 2024, service departments within dealerships are gearing up for a year of significant shifts and innovations. Here are three compelling predictions that are set to redefine the landscape for automotive dealership service departments in the coming year:

Warranty revenue: An 8% surge outpacing customer pay growth

2024 is poised to witness a remarkable 8% surge in warranty revenue, significantly outstripping the growth in customer pay. This rise will be a testament to the evolving dynamics of the automotive service landscape. Dealerships, traditionally reliant on customer-paid services, will experience a substantial uptick in revenue from warranty-related services.

This will be driven by two factors, one obvious and one not obvious. The obvious one is that we will sell millions more new vehicles, which will mean millions more warranty-covered vehicles on the road. The not obvious is that electric vehicles will be the unexpected driver of this surge. As the automotive industry experiences a rapid shift towards electrification, EVs are becoming increasingly prevalent on the roads.

Recent analysis shows that the initial 12-month warranty cost for an EV runs approximately 300% higher than an internal combustion engine vehicle. This will contribute significantly to the growth of warranty-related revenue in service departments and necessitate a strategic recalibration of service offerings.

Technological resurgence in fixed operations

While variable operations continue to grapple with challenges, service departments are set to experience a reinvigorated focus on technological investments in fixed operations. Dealerships are recognizing the pivotal role of technology in enhancing efficiency, streamlining operations, and delivering an unparalleled customer experience.

From advanced diagnostic tools to streamlined appointment scheduling apps, the technology influx aims to elevate the overall service department ecosystem, making it more responsive and customer-centric.

Service warranty: A growing point of contention

As warranty revenue takes center stage, tensions will continue to escalate between dealerships and Original Equipment Manufacturers (OEMs) regarding service warranty. A recent Kerrigan Advisors survey demonstrated poor levels of trust between dealers and OEMs. Only three OEMs earned high levels of trust from more than half of dealers surveyed, and six OEMs earned no trust from at least 30 percent of dealers surveyed.

The increasing complexity of automotive technology, coupled with evolving customer expectations and increased warranty issues, is creating a contentious environment. Dealerships are likely to push for greater flexibility in service warranty agreements, seeking alignment with the changing dynamics of automotive service requirements.

These predictions for automotive dealership service departments in 2024 paint a compelling picture of evolution and adaptation. In the coming year, service departments are not merely adapting to change; they’re strategically navigating complex negotiations with OEMs and embracing technology to meet customer expectations in new and transformative ways.