Service policy as % of sales

[Jim Kellogg]

We are a multi-franchise GM store (all 6 lines) with service policy running 2.4% of total parts & labor gross. What is a good benchmark percentage for service policy?

We also have a standalone Toyota dealership. Should we apply the same benchmark to that store, or should there a different benchmark?

Thanks for your help!

[Michael White]

Are you charging yourself retail??

How do you pay for NTF's not covered by manufacturer, no repairs for due to no parts?

This will make a big difference in your %

Mike

[Mike Vogel]

According to Toyota's guidelines they say it should run between 1.0% to 2.5% of total labor gross profit.

[Mike Vogel]

According to Toyota's guidelines they say it should run between 1.0% to 2.5% of total labor gross profit.

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Mike Vogel
Claremont Toyota/Ford
Claremont, CA

[Doug]

As another fellow aptly pointed out the differences in dealer accounting practices make such omparisons a bit nebulous. For example, I worked at a dealer where EVERY service department write-off was charged to policy (67D acct in GM-ese) at full retail.

I now work at a different store where, for example, uncollectable rental expense is charged to 92D (rental expense), lot damage/shop damage charged to 77D (misc expense)and all other "we gotta eat it" stuff is charged to 67D at cost, not retail.

Technically, in GM accounting, unpaid warranty claims should be charged to 15A--new car policy work....but I doubt that any dealers actually do that. Everybody seems to do things a little differently making comparisons very tricky.

Going off on a tangent here.....does anyone out there ask that new cars sales department share in some policy/rental expense in the interest of "CSI" ? For example, abosrbing rental car "upgrade" charges for a customer who just recently purchased a high-line car ?

Another interesting agreement I have made with the body shop manager and parts manager is that any of us car spend $100 of another departments policy money....in other words, if I am away at lunch an a problem comes up, the B/shop or parts manager can make the decision on my behalf, and vice-versa. I figure that if we can't trust each other at least that much then we have serious problems ! the same agreement extends between service and sales department.

[jargonaut]

This is always a topic of some contention at most dealerships since it takes away from profit and also can distort the view of how a service department's profit and expense truly runs.
That being said i have always found it a good exercise to review monthly all policy work with service manager and advisors to fully understand what and why as to how money was LOST when not claimable under warranty or as an internal sale to some other department. Its fine to have policy work and we all should expect it regularly but taking the time to evaluate it and see how and where and why these expenses happen and to NOT allow them ( to the degree of our control) over and over again for same reasons makes some policy work a good way to improve service on a continuous basis.
One thing I always hated was the manner in which some dealers account for these expenses as though done for some paying customer at full price.

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Alan The Warranty Guy