14 September 2018

The economic recovery witnessed in Denmark has led to increased car sales – but without any real impact on the bottom line of Danish car dealers. The fact is that they miss out on an extra annual revenue of nearly DKK 300 million from service agreements, which nearly half of all new car buyers are interested in. This is the conclusion of a market survey conducted by Analyse Danmark.

According to the latest market overview from the Confederation of Danish Industry around 136,000 new private cars have been sold during the last 12 months. A survey performed by Analyse Danmark in June further shows that 45% of the new car owners are interested in a permanent service agreement. This corresponds to 61,000 of the private car owners having bought a car within the last 12 months wanting a service agreement. The same survey also shows that only 11% of the car owners were offered a permanent service agreement when they last visited a dealer or workshop.

This means that the dealers are missing out on an untapped service agreement revenue in the order of DKK 280 million each year.

– The dealers could realise an annual revenue in the millions if they focused more on offering service agreements to their customers. If they were able to meet the strong demand for service agreements, they would be able to realise a revenue corresponding to a total of DKK 1.4 billion in service agreement value, assuming an average term of agreement of five years. It goes without saying that such amount could really strengthen the robustness of the dealers going forward, Group CEO at IT company OmniCar, Claus T. Hansen, says.

Although more cars are being sold than ever before, there is no real impact on the bottom line of Danish car dealers. The thing is that the margin per sold car is still under pressure. With revenues being under pressure it is of increasing importance that the car dealers and workshops are able to adjust their business model to a world where revenues are not generated solely from the car sale.

– Today, a car sale is a one-off transaction with a limited margin and a minimal chance of the car purchaser returning – unless given an incentive to do so. With a service agreement, the dealers can offer the car purchasers regular service calls that will make the car owners come back again and again. This opens up the potential for building a long-term relationship with the customer, which is far more valuable and profitable than the car sale alone, Claus T. Hansen says.

– Many dealers are well aware of this potential, and new dealers sign up for our service agreement management (SAM) solution nearly every week. But as already mentioned, the potential is much bigger, Claus T. Hansen concludes.

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