This metric, commonly used within automotive retail, represents the percentage of a dealership’s fixed expenses covered by its service, parts, and body shop departments. A calculation is performed using the total gross profit from these departments divided by the dealership’s total fixed overhead costs. The resulting percentage indicates the extent to which the service and parts operations financially support the overall business. For instance, an outcome of 80% signifies that those departments cover 80% of the dealership’s fixed expenses.
The relevance of this indicator stems from its ability to gauge the financial health and operational efficiency of a dealership’s after-sales segments. A high percentage suggests a robust and profitable service and parts operation, providing a buffer against fluctuations in new and used car sales. Historically, dealerships have recognized the importance of these after-sales areas as consistent revenue streams, particularly during economic downturns when vehicle sales may decline. This metric provides a quantifiable way to monitor and improve their contribution.
