Financial morsel

I was at the car dealership today for work to be performed. It was a lot of work, maybe six hours or more. When I returned home, without my vehicle, a neighbor asked how could they get such unexpected work in their immediate schedule?  I said it looked like the majority of things the Dealership was doing in this economic climate were things under warranty. That meant they were simple, quick, and with a low profit margin. Therefore, they loved my kind of vehicle work, major repairs not under warranty, with much higher profit margins.

I started to think about Dealership business models. In the 1950s and 60s Dealership profit models were focused on sales of new vehicles. Significant numbers of people traded in for a new vehicle every few years. The bombardment of advertisements and the planned obsolesce contributed to the turn over. A vehicle that reached about 40 thousand miles had problems. The Dealerships did not make their money from repairs. Repairs on these vehicles could be accomplished by talented amateurs or most any garage.

In the 1970s and 80s the Japanese vehicles started to take America by a storm. They had better quality and less options, with more things included. They also lasted longer. The American automobile campaign to brand buying the vehicles as “un-American” did not work. The move to get the Reagan Administration and Congress to put prohibitive import tariffs did not work. They built assembly plants in America to get around the tariffs and “technically” be American. 

American car manufactures were forced to adapt. They were faced with a shrinking market share at the same time people were buying new vehicles less often. By the 1990s the American auto industry was trying to advertise their quality. Think of the Ford motor company slogan, “quality is job one”.  The financial models of Dealerships were reeling. They needed another profit stream. The manufactures started to build vehicles that were outside the purvey of none Dealerships to profitably repair. They made diagnosis and repair procedures proprietary. Hence Dealership repair people had to attend certified repair schools. 

We move up to today and we see the financial crisis and the economy has conspired again against Dealerships. People are avoiding Dealership repair, except under warranty, seeking lower costs alternatives. Many Dealerships have responded by lowering their repair rates and publishing costs for selected items. But they have also got back in the business of major profits from sales. Pickup trucks and SUVs are their big sellers that also have a high profit margin. 

It is apparent to me my Dealership repair department has been downsized and no longer a major player in the business profit model. Financial repair morsels like me are a god send.