Repair by the dealer or by an independent shop?

Conventional wisdom has it that an independent repair shop is a better bet than a dealership for having your car repaired, but that's not as true today as it used to be.

Dealerships are making a vigorous effort to draw customers to their service departments for repairs.  They now offer longer warranties and certified repair people. This is occurring because profits on new car sales are so low that the service departments have to be profit centres in order for dealerships to survive.

Repairs made under warranty once amounted to 70% of the service done at dealerships. Today, they are only 20% as vehicles are built better and last longer.

Here are the pros and cons for each option.

The dealership

● To retain their franchise licenses, dealerships must pay for training their technicians and providing special tools and equipment. So you can expect their service to be expert.

● Dealers have access to proprietary information on their new Vehicle -information that is often needed for proper diagnosis and repair. Also, dealerships service mostly the makes and models that they sell. Since they are very knowledgeable about those cars, they can usually identify a problem faster.

● The dealership is tied to the auto manufacturer, so if the customer is unhappy with the service or a specific repair, they can always take their complaint to the manufacturer.

● Dealership technicians are usually paid a flat rate. If a specific repair calls for a flat rate of $100 for two hours of work and the repair person can do the job in one hour, they will still receive $100 in compensation. If the job takes longer than two hours, the customer isn’t charged extra. That’s the upside. The downside is that, because of the incentive pay, the repair person may cut corners to finish the repair in less than two hours and pocket more money.

● Many dealers provide a free loaner car or a courtesy shuttle if the customer has to leave the car to be fixed, whereas it's likely the repair shop will expect them to find their own ride home after they’ve dropped the car off.

The independent

● Independent shops tend to be small, employing only three to five technicians. So over time, the customer will come to know the owner and the techs, and is able to pose questions directly to the mechanic working on their car.

● In addition to a personal relationship, the independent offers versatile service for different makes and models. Seasoned mechanics who have worked in independent shops have been exposed to a variety of vehicles. They make excellent resources for difficult repairs.

● Independent shops usually use aftermarket parts unless the customer requests OEM parts (ones supplied by the Original Equipment Manufacturer). Dealerships generally use OEM parts even though they are more expensive than aftermarket parts.

● Traditionally, independents have had lower hourly labor rates than dealerships. That differential is closing, as independents face rising costs. Rapid technological change in the auto industry has resulted in the need for ongoing training and the purchase of new tools and equipment.

● Still, the independent’s repair person is usually paid an hourly rate or a salary. Therefore, the mechanic has no incentive to rush through a repair or to compete with the other techs for the “easier” job.

● Today, top-notch independent repair shops offer nationwide warranties through the auto parts suppliers.

For information about PRUDENT VALUE CARS, visit our web site: www.prudentvaluecars.com 

The trade-offs of a trade-in

When a car owner decides to buy a new auto, they usually wish to sell their current model.  They can do a private transaction, which requires some effort, patience and risk, or they can trade it in at a dealership. A trade-in occurs when a car owner sells their existing model to the dealership as part of a deal to buy another car (new or used).

The advantages of a trade-in (versus a private sale) are the efficiency and ease of buying and selling at the same location, as well as significant tax savings.  The disadvantage is getting a lower price for the trade-in vehicle than you’d get in a private sale.  Let’s look at the trade-offs in more detail.

Advantages

Since even dealers of used cars usually want your trade-in, they tend to make the deal as painless as possible. Trading in a car is usually a same-day affair, with a minimum of procedures.  The dealer assesses your car’s condition, its age and other factors, and then sets its trade-in value.

The emphasis is on convenience.  Unlike a private transaction, you don’t have to place ads, arrange test drives or face legal repercussions if the car breaks down soon after the new owner drives away in it.  (Once a car is traded in at the dealer, it's their responsibility to handle the resale.)

Then there are the potential tax savings. Since the trade-in’s value is deducted from the selling price of the car you’re acquiring, this lowers the tax that you’ll have to pay on the new car.  For example, if you buy a new car worth $40,000, and your trade-in is valued at $20,000, this effectively lowers the new vehicle’s selling price to $20,000.  Instead of paying HST of $5,200, you would pay $2,600—a saving of $2,600.

Disadvantage

The downside is that most dealerships will offer less than your car is worth. The dealer incurs costs in cleaning the car and fixing any problems and still must be able to sell it at a profit. So you should expect a low offer.  If the offer for your used model sounds too good to be true, it probably is: the dealer is likely making up for it in the negotiated price of your new car.

However, knowing the true market value of your trade-in vehicle will give you a stronger hand when negotiating.  It pays to study the market in order to get a realistic idea of your existing car’s value. Canadian Black Book (canadianblackbook.com) is considered the industry Bible for providing market values for cars, trucks and SUVs at the wholesale level.

Also, find out the current market demand for your make and model, and whether the dealership is oversupplied with that model. How much the dealership is willing to offer for your trade-in depends on supply and demand.

Assemble all your car’s service records. If you can demonstrate that you’ve looked after your car with recommended maintenance, it will fetch a higher trade-in price (whether at a dealership or privately).  Whichever route you go, it’s important to weigh the trade-offs when considering how to sell your current vehicle and buy another. 

For information about PRUDENT VALUE CARS, visit our web site:

www.prudentvaluecars.com