Cox Automotive’s latest research has good news and bad news for dealership service departments.

The good news: Cars are getting older and are getting serviced more often, and the average dealership service revenue has risen 33% since 2018, climbing to $9.23 million annually.

The bad news: Dealerships are leaking service customers badly as independent service operations soak up market share.

According to the Cox Automotive Service Industry Study, dealerships’ share of the vehicle service market has sunk to 29% — down 12% from the 2018 study — while independent general repair shops and quick lube stores registered gains, a situation Cox called “a crisis in dealer service retention.”

The survey of 1,974 vehicle owners who have had their car serviced in the past 12 months, conducted in April and May, found independent general repair businesses have surpassed dealerships as the most preferred option for service, chosen by 33% of respondents to 31% for dealerships.

The study showed dealers are losing the most business on newer cars. Among owners of vehicles less than 2 years old, 54% had those vehicles serviced by the dealership that sold them, a huge drop from 72% in 2023, Cox said. For vehicles in the 2-5-year-old range, the dealership share fell to 51%, down from 70% in 2018.

In a news release, Cox said the trend toward “buying here but getting service somewhere else” can make a big impact on customer loyalty in dealerships’ sales departments as well. The survey found 74% of car owners who had their car serviced at the dealership said they’re likely to buy their next car from the same store, compared to just 44% of those who didn’t return to the dealer for service.

“These findings from our market data and surveys underscore the urgent need for dealerships to reassess their service strategies to recapture market share and enhance customer retention,” Cox Automotive director of product consulting Skyler Chadwick said.

One twist to the study’s results is that four of the top reasons cited for not returning to the dealer of purchase for service were about price — including concern they’ll be overcharged and the perception that total cost, labor charges and parts charges are unreasonable — but the average customer spend at a dealership ($261) is actually less than that for a general repair shop ($275).

And Cox cited its 2024 consumer market update’s finding that if the cost was equal, more people preferred a dealership (45%) to a general repair shop (32%).

So, what can dealers do to earn back their lost market share?

The study found transparency and communication addresses many of customers’ frustrations with dealership service.

The survey found 45% of dealership service customers were dissatisfied with their experience, citing service taking longer than expected (24%), unexpected costs (13%), dealers trying to push additional services (13%) and a final price higher than the estimate (12%).

More than half (51%) of the respondents expressed interest in having their car picked up for service and delivered when it was completed, with 61% saying they would pay extra for that service, and 55% said it’s very important to be able to compare costs online.

What owners want is clear, Cox said: transparent pricing, easy scheduling and flexible service options, as well as digital tools that simplify communication and conveniences such as after-hours scheduling, pickup and delivery, and rideshare integration.

The study also noted the service lane is an often-missed opportunity to source used inventory, finding 47% of car owners facing a large repair bill would prefer to replace their car to repairing it, with an average cost of $3,195 at which customers start to considering trading in their vehicle.

But while 33% said they would be highly interested in getting a trade-in value during a service visit, just 14% said a dealer has given them one.

“Dealerships are sitting on a gold mine,” Chadwick said. “Half of customers facing major repairs would consider trading in, yet most are never approached with an appraisal, leaving millions in inventory acquisition costs on the table.

“There is a clear call to action here for dealerships to proactively address customer dissatisfaction, strengthen communication and improve sales-to-service coordination to build back market share through lasting relationships.”

The full study is available here.