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At your service?

By / 5 years ago / Comment / No Comments

Service, maintenance and repair are expensive elements in the company car equation, but that does not mean they cannot be regularly reviewed by fleets seeking to improve cost efficiencies.

An important factor in managing SMR costs is selecting where to go for servicing and repair jobs. The basic choice is between franchised main dealers or independently run garages. Here the issues of price, quality and expertise come into play. Both sectors have raised their games in recent years and the best of them can offer fleets excellent customer care packages at highly competitive prices.

Franchised dealers enjoy the support and blessing of car manufacturers as both parties have invested heavily in their mutually beneficial partnership. While they still dominate fleet SMR work, the independents, ranging from sole traders, regional and national groups to fast fit operators, have gained a foothold.

According to newly published SMR research from Trend Tracker, Castrol Professional Car Servicing & Repair Trend Tracker 2012 Update, the level of investment in hardware and skills made by the top-end independents is seriously challenging the supremacy of franchised workshops.

'There has been a general expectation in the market over the last decade that the continued viability of independent garage workshops would be undermined by their limited capital investment base and by advances in vehicle technology. It was anticipated that the servicing and repair of modern vehicles might be beyond the capability of independent garages. This has not generally proved to be the case,’ says Trend Tracker consultant, Toby Procter.

Furthermore, recent years have seen work traditionally conducted by main dealers being opened up to the independent sector as a result of European competition legislation ordering carmakers to make available technical information for repair jobs. Also under these rules carmaker warranties are deemed to be protected if independent repairers use manufacturer approved parts and servicing schedules are adhered to.  While there's no doubting the professionalism of a growing breed of switched-on independents, fleets are still faced with a quandary; do they buy on price and go down the independent route, or stick with franchised sites?

It's not an easy question to answer as it is dependent on all manner of logistical, geographical and managerial considerations. Also, while franchised sites have been long-criticised for being expensive, a growing number of car brands are offering fleets fixed priced servicing in a bid to retain their custom.

‘There are upwards pressures on SMR costs in labour, parts and consumables and the difficulty facing fleet managers is to keep them under control,’ says Gary Killeen, GE Capital's UK fleet services commercial director.

‘The developments that have helped most noticeably over the last few years are initiatives from manufacturers designed to drive more fleet SMR business into franchised networks. Audi, Volkswagen and SEAT, among others, are all offering fixed price servicing, while various fleet national pricing programmes have also been introduced.’

Killeen believes franchised workshops have addressed the pricing issue, and even when they are more expensive might offer the best long term solution.

‘While it is still valid to debate the relative advantages of using franchised or independent garages, these recent initiatives have made the real cost of using the franchised network much more price competitive with major independents.

Certainly, franchised dealers remain more expensive at face value but, thanks to factors such as the likelihood of goodwill claims through franchised dealers, the perceived negative effect on residual values of using independents and the overall quality of the driver and customer experience, this difference, we believe, disappears,’ he adds.

Neville Briggs, managing director of CFC Solutions, agrees manufacturers have made a lot of headway in rolling out national fixed price servicing schemes, which some independents are now trying to emulate.

‘Fleet SMR in 2012 is not just about containing costs but making them as predictable as possible. Against an economic backdrop that continues to be uncertain there is a strong desire to insulate against unexpected spending and to ensure that everything stays within budget,’ he said.

‘Fleets are therefore showing a lot of interest in fixed price initiatives, such as menu pricing, which is becoming much more widespread in franchised dealers across a much larger number of jobs. Even among fleets that are buying more SMR from the independent sector, there is a move towards using fixed price servicing.’

Another issue impacting choice is the growing trend towards running cars longer than three years/60,000 miles as businesses aim to minimise their fleet expenses in the current economic climate. However, the downside of this is the fourth year exposes most cars to the potential of out of warranty work and this will effect outright purchased and funded cars.

Ogilvie Fleet, which manages more than 10,000 cars and vans, has noticed the average age of its vehicles has risen to 41 months.

‘As most warranties expire at the end of the third year total mileages will increase, thus the proportion of SMR in the total rental is increased. However, there is still a rental reduction overall as the residual value curve flattens,’ says Nick Hardy, sales and marketing director.

Ogilvie Fleet’s policy is to only use franchised dealers for SMR work unless clients specifically request that independents are used. It believes franchised sites offer the best in terms of service and access to manufacturer data. It also maintains that independents do not offer significant savings.

‘We find that using franchised dealers results in manufacturers providing greater support for any out of warranty work if the need arises, better residual values are achieved and overall costs aren’t actually increased, as with independents longer job times generally outweigh any labour rate reductions.

‘Even if there is a saving of a few pounds we believe the customer experience of drivers and our clients is more important,’ says Hardy.

This question of franchised sites having the monopoly on standards is challenged by the Fleet Support Group (FSG), the fleet management company which only recruits independent garages to provide SMR work in its national network of around 500 repairers.

‘We treat garages like we treat our customers, they are our partners in delivering a first rate service to clients. We started using independents virtually before any other fleet organisation because in our experience customer service is consistently to a high standard,’ says FSG chairman and founder, Geoffrey Bray.

‘I am not anti-franchised dealers; I am anti-bad service. Our independent network delivers excellent customer service at the right price without any up-selling,’ he adds. Bray claims his network offers SMR savings over franchised sites of between 20-30%.

‘Our promise to customers is that our network will not charge for unnecessary items. To deliver this objective we provide nationwide fixed price servicing and repairs.  While cost savings remain at the crux of the debate there's also the important matter of resale values to consider, and whether a franchised dealer's stamp in a service book is actually worth more than an independent's.

It's widely acknowledged that top of the range performance lines, notably Mercedes AMG and BMW M-series, need to stay in the franchised sector to reap the best returns, but what about more mainstream models?

John Davies, chairman of the Vehicle Remarketing Association, which looks after the interests of used car sellers, dispels the myth as he believes there's pretty much parity between the two.

‘Trade and consumer buyers will start by checking whether the car has a service history. Next they will check where it has been serviced and any supporting paperwork the car may have, such as servicing bills.

‘We believe that buyers will still pay a little more for a franchised dealer service history as they have extra peace of mind if it has been serviced by an own-brand dealer, and that its warranty is still intact if the car is less than three years old. Otherwise if a standard car is out of warranty then a full service history, franchised or non franchised, shouldn't be an issue.’

The fast fit alternative 

Big name national repair chains are an increasingly viable alternative to franchised workshops, especially with fast fit specialists, such as Kwik-Fit and National Tyres, offering specialist fleet services.

Fleets are also being targeted by autocentre chains, notably Formula One and more recently Halfords, which has already has 260 sites.

As one of the biggest independents serving the business sector, Kwik-Fit Fleet believes it offers a better service than franchised workshops.

The company has invested heavily in fully trained mechanics and specialist equipment to offer manufacturer servicing across most of its 672 outlets. ‘We estimate that the average servicing cost is up to 20% less than at a franchised dealer,’ said Peter Lambert, Kwik-Fit's fleet director.

‘Overall it is difficult to find any work carried out on a company car or van that will be cheaper at a franchised dealer than at a fast-fit, which is why Kwik-Fit Fleet has seen its share of the corporate vehicle servicing market increase 35% last year.'

According to Lambert the chain is also upping its game in terms of the quality of its centres, with plans for 100 sites to be modernised annually until the network is completed at a cost of £20m a year. These are significant sums aimed at facilitating  existing retail customers and wooing new corporate accounts.

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