In the 2013 Chase Auto Finance Dealer Survey released earlier this winter, dealers were asked what parts of their business were seeing growth.

Out of the 262 dealer principals taking the survey, 207 of them (or an even 79 percent) said they were seeing growth in pre-owned sales. More than 56 percent of the 262 dealers said they were improving in service sales. (The survey was an online poll conducted among Chase Auto Finance's dealer base between Dec. 18 and Jan. 13.)

These two areas beat out all other categories, which included new sales (55.7 percent seeing growth), leases (38.2 percent) and service contract/warranty sales (48.5 percent), as well as the respective proportions for dealers who selected “none” (4.2 percent) and “other” (8.8 percent).

When asked what parts of their business they were seeing the most growth, more of the dealers pinpointed new-car sales (second-most commonly cited option at 29 percent) than service sales (third at 17.1 percent). Pre-owned sales still led the way at 41.3 percent.

As important as new-car sales, F&I and other areas of a store can be, strength in the service department and pre-owned ties into one of the measurements that NADA Academy considers in determining the health of a franchised dealership’s business.

When calculating the percent of the store’s expenses that are covered by service, parts and body shop gross profits, the standard dealers should aim for is 75 percent, says management instructor Les Abrams.

Taking it a step further is “total dealership absorption,” where service/parts/body shop gross profits and used-car gross profits cover the entirety of a dealership’s expenses.

“Rephrasing that, we’re saying, ‘You do not need to sell a single new car to break even.’ All your new-car gross profit will be net profit,’” Abrams told Auto Remarketing in a recent interview.

Doing this, Abrams said, gives dealers solid financing footing and allows them to maneuver through the ebb-and-flow of new-vehicle sales.

To learn more about the importance of the service department, see the print edition of the March 15 Auto Remarketing and stay tuned for the digital edition of this magazine.