Service departments have posted some of their best profits ever this year. But the dealers making the most money aren't necessarily the ones charging the highest rates.
Driving the news: According to Reynolds and Reynolds' recently released Fixed Operations Golden Metrics, profit per repair order jumped for dealers in nearly all markets with some variation depending on volume levels.
As of May, major urban stores averaged $414 per customer pay repair order (RO), up $33 year-over-year.
Metro stores rose $23 to $349 in total, and community-based stores accrued $268—adding $9.
Rural location gained $2 and averaged $225 per RO.
Why it matters: Over the years, the service department has continued to be a stable and central profitability lever for the majority of dealers. However, customers are starting to decline recommended repairs, revealing a ceiling on how much they are willing to pay, and how much dealers can charge.
The study attributes most of the profit gains to higher effective labor rates (ELR).
Major urban stores averaged $166.88/hour, up about $8 year-over-year, and metro locations reached $131.66/hour, an increase of $5.
Community-based dealerships hit $151.04/hour, a $3 rise, and rural stores averaged $124.00/hour, up about $6 year-over-year.
You see, in recent history, the cost of parts has been rising steadily due to supply chain disruptions, inflation in raw materials, and other markups. This can add pressure to repair order profitability if labor rates do not proportionally rise as well.
Between the lines: Reynolds identified another way dealers are moving the needle on profitability: "technician recommendation software."
This "software" usually includes tools and automated processes that can do things like determine if parts are available and how much they cost. Then, the technician can automatically send recommendations to the advisor and potentially add them to the RO.
But the industry is seeing even more cutting-edge applications like Agentic AI, automated vehicle inspection and merchandising, and large language model communications.
In the report's words: "When done manually, such processes are prone to inaccuracies in quotes and time wasted. The data shows dealerships that use a tool to create these efficiencies saw significant, lucrative results over dealerships without one."
"Automated dealers" sell 1.74 hours per RO versus 1.55 for manual operations.
And that extra 0.19 hours generates $26.60 more revenue per transaction before parts markup.
The takeaway: Service departments hit record profits this year, but those gains were built on pricing strategies that could be getting close to maxing out. The next era of fixed ops growth probably won’t come from charging more—it will come from operating smarter and more efficiently. Dealers that arm technicians with automated tools are already pulling away, and the gap will likely widen from here.
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