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Service Department Profitability
Dec 18, 2025
1 min read

The Complete Playbook for Maximizing Dealership Service Profitability

Dealership service department with technicians
In the fast-paced world of automotive dealerships, maintaining a profitable service department can feel like navigating a winding road with unexpected detours. As costs rise and competition intensifies, service departments are under more pressure than ever to perform. The numbers paint a sobering picture: dealerships have lost 12% of service visits to independents since 2018, and the loyalty of owners with vehicles less than two years old has plummeted to just 54%. These trends are not just statistics—they’re red flags signaling the urgent need for dealerships to reassess and revamp their service operations. But here's the good news: with the right strategies in place, your service department can not only survive but thrive in this challenging landscape. In this comprehensive guide, we'll explore the actionable steps you can take to optimize your service workflows, improve customer retention, and leverage technology to gain a competitive edge. We'll dive into the specific areas where dealerships are losing service share and offer targeted solutions to win back those visits. Additionally, we'll discuss the role of AI and digital tools in enhancing service efficiency and customer satisfaction. By implementing the strategies outlined here, your dealership can transform its service department into a powerhouse of profitability and customer loyalty. So, buckle up and get ready to shift your service operations into high gear.

Understanding the Challenge

Technicians in dealership service bay

The automotive service industry is facing unprecedented challenges that are squeezing profitability. Rising operational costs, including labor and parts, are outpacing revenue growth for many dealerships. Meanwhile, competition from independent repair shops and mobile service providers is eroding market share. The statistics tell a story of declining customer retention, with a significant drop in the number of owners returning to dealerships for service, particularly among those with newer vehicles.

One of the key areas where dealerships are losing ground is in capturing visits from owners of vehicles aged 0–5 years. These owners are increasingly opting for quick maintenance at independent shops, often due to perceived lower costs and convenience. Additionally, price-sensitive jobs such as oil changes and tire rotations are being diverted away from dealerships, further impacting profitability.

Service departments are also grappling with the challenge of adapting to new technology demands. The rise of electric vehicles (EVs) has introduced a need for specialized training and equipment, which can be costly and time-consuming to implement. Furthermore, the technician shortage continues to plague the industry, with many shops operating understaffed and struggling to recruit and retain skilled workers.

Related Topics

increase service department revenuedealership fixed ops profitabilityservice department kpi improvementfixed absorptioneffective labor rate (ELR)

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