5 Essential Metrics for Car Dealerships

by Kristine on June 17, 2022

The automotive service industry has a lot of moving parts. Automotive shops and dealerships are complex operations with multiple departments and the products and services they provide can often be complicated. Because of this, it's difficult to know which metrics or KPIs will produce the best result or help optimize your dealership's operations.

These metrics that you should be tracking can be used to make a dramatic impact on your dealership's operations.

Service Revenue per RO

What is it?

SRPO is the service revenue earned by a dealership divided by the number of repair orders completed by your service department. It provides an indication of how much money you are making on each repair order, which can help you determine if you're meeting your profitability goals. To compute this metric, take your total service revenue and divide it by the number of repair orders completed.

Why is it important?

Service revenue is the second-largest source of revenue for auto dealerships. According to NADA, the service and parts department accounts for the majority of a dealership's profit. It’s important to understand how much service revenue your dealership generates so that you can create strategies to improve it.

A low service revenue per RO ratio can indicate that either customers are not getting their vehicles serviced at your dealership or they are buying their vehicles elsewhere. Both situations are not good for you or your dealership's overall financial health.

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Average Labor Rate per Hour

What is it?

ALRH is a metric used to benchmark labor productivity. It is the average of labor rates across all departments in a dealership, including service and parts. The average labor rate is calculated by dividing the total labor costs for the period by the number of hours worked during that period.

Why is it important?

This metric helps you determine whether you are making enough money on each vehicle, and it also provides a benchmark for future periods. You can use this metric to compare your performance from one period to another or against industry averages. Every dealership aims for - low operating costs and high revenue.

Number of ROs per Technician

What is it?

The average number of ROs per technician is an important metric to track because it will help you determine how many customers are being served by each member of your team. This information can help you determine if your staff has enough capacity to meet demand, and if not, where you need to add more staff or make other changes. To calculate the number of ROs per technician, divide the total number of ROs by the total number of technicians.

Why is it important?

This metric helps you understand how productive your technicians are and what they are doing with their time. You can use it to identify trends, such as whether there are too many new-vehicle sales or not enough scheduled maintenance being performed, so you can make adjustments accordingly. If the number is too high is an indication that there may be too many cars being worked on by each technician at once and that there may be too few technicians available for the number of cars coming in for service or repair at any given time. The result could be long wait times for customers and unhappy customers who are not getting their vehicles back on time or as promised when they brought them in for service or repair work.

Customer Pay Completion Percentage

What is it?

The CPC percentage is the percentage of work orders that are completed by customers paying for their service work before leaving the dealership. This metric is calculated by dividing the number of customer-paid jobs by the total number of jobs that were completed at a dealership during a given period of time (typically one month).

Why is it important?

This metric is important because it shows how quickly your dealership can get customers back on the road and out of your service bay. The quicker you can do this, the less likely customers will be to shop around for their next new car or truck purchase. The longer a customer waits for their vehicle to be finished, the less likely they are to return to your dealership for future service needs.

Net Promoter Score (NPS)

What is it?

NPS is a single-question customer loyalty metric that measures the willingness of customers to recommend your dealership to others. The NPS is computed by asking one simple question: "How likely are you to recommend this product/service?"

Why is it important?

Net Promoter Score (NPS) is one of the most important metrics for dealerships because of its direct correlation with customer retention and growth. In fact, according to a study conducted by Bain & Company, companies with high NPS ratings grow revenue at 2x the rate of those with low NPS ratings.

Metrics can be intimidating

By understanding how these basics benchmarks can help you to manage your service department better, you achieve one of the most important goals in any business: growth. Every dealership is unique in its market and volume. That is why you need to be measuring your KPIs and taking action to address them. By acting on what you find, you can begin to grow your business in the right direction! 

Topics: auto tips, automotive business, car dealership metrics