Dealers lose £460 million in lost 'red work' sales

Franchised car dealers are failing to sell enough red work, which is costing them more than £450 million in lost revenue, according to new data from automotive industry consultancy BTC.

Red work refers to urgently required repairs and maintenance, which if not carried out may pose serious safety risks and make vehicles unroadworthy. This type of work is usually identified by customer vehicle health checks, and any issues should be pushed by the aftersales department.

However, many car dealerships are failing to sell this urgent work to customers via their in-house mechanics, losing out on this highly valuable revenue to third party mechanics.

Performing adequate health checks on all your vehicles and maximising aftersales opportunities are vital to the running of your car dealership. However, you should also be sure to get the fundamentals right too. That includes having the correct levels of motor trade insurance and road risks insurance for your business.

BTC claim that across the UK’s franchised dealer network, missed opportunities to sell red work cost each of the 4,900 businesses an average of around £92,145 in lost revenue.

The data comes from BTC’s autoVHC electronic vehicle health check system, which sampled information from a sample of some 500 UK-based car dealers throughout 2014. BTC found that only 56 per cent of urgent red work, including worn tires and faulty brakes, was sold.

This equates to an estimated loss of £46 million across the sample of 500 dealers. Extrapolated across the entirely franchised dealer network, this equates to a loss of £451.5 million per year.

Guy Allman, the chief executive of BTC, said: “The failure to sell red work continues to be a significant missed revenue opportunity for franchised dealers.

“When you consider those aftersales departments typically contribute 50 per cent of a dealership’s annual profits, this is a significant problem that needs addressing.

“The fact that dealers are only persuading customers to resolve these issues 56 per cent of the time also raises a major duty of care question, with the threat of potential legal action another concern.”