Fixed operations continue to evolve as technology and service complexity reshape how dealerships operate. While the automotive industry continues to grapple with issues such as EV uncertainty, pricing pressure, and macro uncertainty, other factors at play are reshaping service departments: warranty, recalls, and technology-driven complexity are now determining who thrives and who leaves money on the table.

At the start of 2025, we shared our predictions on how these forces would impact fixed ops. One year later, it’s time to take a look at what we got right, what we underestimated, and — more importantly — what dealers must do differently to drive revenue, profitability, and customer retention in 2026 and beyond.

Some predictions landed squarely on target. Others were directionally right but slightly mis-timed. That’s the risk in a business changing faster than ever. The data is clear — the question is whether the industry is ready to act on it.

2025 Prediction #1: Enhanced Service Department Operations (Grade: C)

We anticipated an increase in EV-related service, driven by higher repair and parts costs. The underlying data still holds: EV repairs (not maintenance) remain significantly more expensive than internal combustion vehicles, and there are now more than five million EVs on U.S. roads.  Now changes to the geo-political landscape are impacting new EV sales. EV’s didn’t collapse, but they flattened.

With 2026 EV sales projected to hover around 1.2 million units the opportunity is still developing. Still, the conclusion hasn’t changed: dealers must deliver a superior service experience regardless of propulsion system. The need didn’t disappear; it will just arrive more gradually.

2025 Prediction #2: The Rising Importance of Safety Recalls (Grade: A)

This one was clear, and the industry validated it. 2025 was another record year, with more than 24.4 million vehicles recalled across 360-plus recall events. Increasing vehicle complexity, software-driven systems, and advanced safety technology continue to introduce more points of failure. Recalls are no longer episodic disruptions; they are a structural reality of modern vehicles.

Dealers who treat recalls as operational nuisances rather than strategic opportunities are leaving both current revenue and future customer retention on the table.

2025 Prediction #3: Optimizing Warranty Revenue and Profitability (Grade: A)

Warranty has become central to fixed ops health and profitability. In 2025, we saw more dealers recognize that warranty performance affects not just revenue and gross profit, but technician pay and retention, and service capacity. Faster claims processing, tighter cost controls, and improved compliance made a measurable difference. Warranty is no longer a back-office function.

What changed in 2025 wasn’t the importance of warranty; it was the understanding of its impact. When warranty claims processing is optimized, service departments operate more smoothly, quickly, and profitably. The conclusion is clear: warranty is not just a back-office function. It is an underused profit lever in fixed operations. Dealers who invested in modernizing warranty processing in 2025 gained an advantage that will grow in 2026 and beyond. Those who did not are being impacted; the danger is that they may not see it.

2025 Prediction #4: Fostering Customer Relations and Loyalty (Grade: B)

Warranties emerge as a crucial touchpoint for cultivating customer relations and fostering brand loyalty. Since it appears that warranty service will rise and customer pay opportunities will decline, dealers need to be prepared for this shift. By delivering exceptional warranty service experiences, dealerships can lay the foundation for long-term relationships with customers, instill confidence in the brand and drive repeat business.

We correctly identified how the condition would evolve but misjudged the industry’s willingness to adapt. The results are sobering according to Cox Automotive, dealership share of the U.S. service market dropped again in 2025, now hovering around 30%. Since 2018, dealers have lost 12% of service visits to independents and aftermarket competitors. To offset the decline, some dealers are raising prices. This is a dangerous strategy since the top reasons vehicle owners’ defect is high prices. The warning signs are there; the mindset shift has lagged. Warranty service is overwhelmingly the reason customers return to dealerships, yet many dealers still treat it as a low-margin obligation rather than a loyalty engine.

So, what does this mean for 2026? Here’s what we think:

EVs will matter less as a category, but technology will matter more overall.

Whether ICE, hybrid, or EV, today’s vehicles are rolling computer platforms. Software, sensors, ADAS, and connectivity will drive service complexity more than propulsion type. For fixed operations, this shift changes everything. EV warranty service volume will continue to rise gradually. Dealers who invest in advanced diagnostics, technician development, and technology-enabled workflows will be positioned to absorb that complexity. Those who don’t will struggle with inefficiency, rework, and delayed reimbursement.

Recalls will continue to climb

More technology in vehicles means more opportunity for quality issues, more defects, and perhaps a tightening regulatory environment in 2026 and beyond.  Dealers who operationalize recall management with standardized processes, clear accountability, and integrated scheduling — will turn recalls into opportunities for service revenue and customer retention. Those who treat recalls as interruptions will experience capacity strain, frustrated customers, and missed upsell opportunities.

In 2026, recall execution will be a clear differentiator. You must identify and act on open recalls in your service lane, inventory and PMA.

Customer retention will continue to decline unless dealers change course

Dealership service retention will continue to erode in 2026 unless dealers fundamentally change how they deliver the service experience.

A technology enhanced service experience is no longer an option – you must deliver what the vehicle owner expects:

High tech in the form of online scheduling and mobile device updates? Yes.

High touch in the form of personalized in-person service? Yes.

Mobile service? Yes.

Pick-up and delivery? Of course.

In particular, mobile service and pick-up & delivery are 2 key strategies to deploy, they are a huge driver to enhance warranty as a significant contributor to fixed ops profitability. Let’s face it, warranty labor rates and parts mark-ups have risen dramatically – and you don’t discount warranty like you do customer pay. Just raising prices to offset fewer visits is a short-term fix that accelerates long-term erosion.

Warranty may be the single most important lever dealers have to reverse this trend. Remember – Every warranty interaction is a chance to retain – or lose – a customer. And given the rising importance of warranty, you must optimize your warranty operations for optimal efficiency. Treating it as a cost center is no longer sustainable.

The bottom line for 2026

2026 will reward dealers who rethink warranty as a strategic asset, not an administrative burden. Fixed operations leaders who align technology, process, and mindset around warranty optimization will gain efficiency, improve cash flow, and strengthen profitability.

The opportunity is real. The data is clear. The advantage belongs to the dealers willing to act.

 

Jim Roche is founder and CEO of WarrCloud