In this latest post to help you cut your expenditures and maximise the amount you can save or invest each month, we’d like to share this guide to slashing the price of car servicing. This article will appeal to any drivers; from those who have just passed their test, to those who have spent 50 years on the road.
What options do you have when choosing a provider?
Just like when choosing a stockbroker, we suggest you expand your search wide and far when looking for the best garage for your vehicle.
Don’t just opt for your local mechanic for the sake of convenience. That convenience may come at a high price. Survey the market and compare price, service quality and customer reviews.
Here are the main local car servicing options that will be available to you in most parts of the UK:
- Franchise dealer service department
- Franchise or chain of garages
- Independent brand-specific specialist garages
- Independent universal garages
Why the franchise dealers come at the greatest cost
If you’ve ever enquired at a main dealer for a list of car service prices, you’ll know that this is where the highest prices in the industry are found.
It’s common sense that the premium brands will carry the highest price, but why is this exactly?
It’s because of the secret business model of the franchise dealers based in the UK:
Franchise dealers don’t make much money by selling cars.
That’s right, franchise dealers sell their vehicle stock at a very low margin. This even includes well-known premium German and British marques. .
This is because the manufacturer incentivises dealers to shift high volumes with quarterly bonuses and rebates. This, in turn, encourages dealers to sacrifice their profit margin on each vehicle sold, meaning that sometimes the dealer barely makes a 10% profit on a vehicle sale.
That 10% figure is gross profit, which only takes into account the purchase price of the vehicle. A dealership has an endless list of other expenses including sale commissions; support staff, shiny premises and flexible trader insurance. After attributing a fair portion of these costs to each car sale, you may find that dealers lose money on a competitively priced sale.
But that’s all part of the plan. Once a customer has purchased a brand-new vehicle, they’ll almost certainly begin using the dealership for their car servicing and MOT. Using the main dealer is often a condition of the warranty on the vehicle, so it’s a no brainer for the customer, The chances of retention are fairly high even after the warranty period has expired, because of the habit that has been formed over the years.
Bringing this full circle; the service department is the main profit centre of a modern car dealership. It’s the business that generates enough profit to support the entire operation. Your car service bills (which can exceed £500 per year for premium vehicle brands) keep all of the lights on. This is why some dealers are able to charge upwards of £120 per hour for apprentice mechanics who are paid less than £20 per hour. Now that’s a profit margin.
The luxury dealers pull out all the stops to provide a premium experience to go along with the price tag. A greeting service, complimentary coffee and free door-to-door drop-off might all be included.
How nationwide garage chains undercut the dealers
Nationwide garage chains such as Kwikfit, Protyre or IQ operate with clear pricing that deliberately undercuts franchise dealers.
Car website Autobutler quotes £85 for the average franchise dealer MOT, whereas ProTyre quotes £32.
Chain garages use simple, purpose-built premises and unlike franchise dealers, they don’t have to spend six-figure sums maintaining a large showroom or sales staff. This means that their overhead costs are far lower, and the price you pay is more closely linked to the direct costs of performing an MOT or car service.
Chain garages offer a consistent service and benefit from consistent policies, procedures and training of staff from location to location.
Feedback from customers will have led to incremental improvements which should result in a straightforward and pleasant experience for a reasonable price.
Part used should be of good quality, although they won’t necessarily be from the OEM (original equipment manufacturer).
The trade-off of searching for the cheapest service
The bottom of the market is represented by the independent ‘mom ‘n pop’ garages located in suburbs across the UK.
These businesses operate on a shoestring and don’t aim to offer a polished or premium experience. Even a waiting room is a bonus!
I place an emphasis on the words in a position to offer because simply choosing a local mechanic gives you no guarantee that they are reputable, trustworthy traders.
You’ll need to scrutinise reviews online before buying. Nightmare stories of ‘free MOTs’ which became £1,000+ repair bills for unnecessary repair work are widespread across the bad actors in this industry. Due diligence when researching garages will be needed to ensure that you avoid these cowboys.
This is why many drivers opt for chain or dealer garages when servicing their car.
How could cheaper car servicing help you grow your wealth?
It doesn’t take a huge saving on servicing costs to greatly add up within an investment portfolio. Let’s consider the following scenario:
If you can save £60 on the annual price of car maintenance, that’s an additional £5 per month you can contribute to your UK stockbroker account.
- When invested at a 7% annual return, that modest stream of fivers will accumulate to £2,620.10 after twenty years in the stock market.
- If you could save £120 per year on a service, that would grow to £5,240.20.
These are both substantial sums. You could put this towards a new car, a holiday or a once-in-a-lifetime experience in the UK.
It’s clear that any saving you can achieve when navigating the annual exercise of servicing your motor will provide you with some attractive rewards at a later date if you save the money or invest it in the stock market.