Service departments face a myriad of challenges that threaten profitability. Rising operational costs, a shortage of skilled technicians, and increased competition from independent repair shops are just the tip of the iceberg. According to recent studies, U.S. dealerships need approximately 76,000 new technicians annually, yet only around 39,000 graduates are available, leaving a significant shortfall.

Compounding these issues, service retention rates have been declining. In 2025, only 54% of owners of vehicles aged 0-2 years returned to dealerships for service, down from 72% in 2023. This decline in loyalty can be attributed to factors such as cost concerns and communication shortfalls, with many customers feeling dissatisfied with their dealership experiences.

Additionally, the pressure to maintain a healthy effective labor rate (ELR) and hours per RO (HPRO) has intensified. Service departments are expected to balance these metrics while avoiding customer decline rates, which can be challenging in today's dynamic market.

Understanding these challenges is crucial for any service department looking to improve profitability. It sets the stage for exploring how strategic changes in workflow, customer engagement, and resource allocation can lead to tangible improvements.

The automotive service industry is undergoing significant transformations driven by both technological advancements and shifts in consumer behavior. The increasing adoption of electric vehicles (EVs) and the demand for digital convenience are reshaping the way service departments operate.

In this landscape, video multipoint inspections (MPI) have become a valuable tool, with dealerships using platforms like Xtime seeing a 69% conversion rate and swift service approvals. This technology not only enhances transparency but also speeds up the decision-making process, yielding higher customer satisfaction.

AI-driven solutions are also gaining traction. AI voice agents, such as those offered by STELLA Automotive, are being used to recover missed calls and increase appointment bookings, addressing the persistent challenge of underutilized service slots.

Moreover, consumer financing options like Buy Now, Pay Later (BNPL) are becoming popular, allowing dealerships to secure more service approvals without negatively impacting customer satisfaction scores. Over 50% of U.S. dealerships offer Sunbit BNPL, driving substantial revenue growth.