J.D. Power: Less Than One-Half of Non-Luxury Vehicle Owners Remain Loyal to Dealers

WESTLAKE VILLAGE, Calif. November 2, 2004; Less than one-half of non-luxury vehicle owners remain loyal to new car dealers for service after the fourth year of vehicle ownership, according to the J.D. Power and Associates 2004 Service Usage and Retention StudySM (SURS) released today.

The study, based on responses from 10,201 owners of 2000 model-year vehicles, measures buyer behavior, customer retention, spending patterns and customer satisfaction at new vehicle dealers as well as non-dealer aftermarket service facilities.

Defection to non-dealer facilities is faster among non-luxury customers because they typically have shorter warranties. The study finds that these customers begin defecting to aftermarket service facilities within the first year of ownership. Non-luxury dealerships retain only 66 percent of annual service visits in the first year of ownership, slipping to 55 percent by the third year. By the time most customers come off warranty in the fourth year, the dealer share of service visits falls to 47 percent.

“Maintaining high customer satisfaction through service visits is not only crucial to dealers, but to manufacturers as well,” said Jon Osborn, director of customer satisfaction research at J.D. Power and Associates. “Dealer service is the last touch point manufacturers have with their vehicle owners. In the fourth year of ownership, many consumers are considering their next new-vehicle purchase. Exemplary dealer service can help keep customers coming back to the brand and to the dealership for future vehicle sales and service.”

Across the industry, the share of dealer service visits for post-warranty customers is strongly associated with in-warranty satisfaction. Customers who rate their dealership highly when their vehicles are still within warranty (as measured in the J.D. Power and Associates Customer Satisfaction Index StudySM) are more likely to continue to return to the dealership after the warranty has expired.

A factor that slows this exodus is extended warranties, or service contracts. Nearly 25 percent of vehicle owners indicate that they purchased an extended warranty or service contract when they originally acquired their vehicle. Customers having these tend to frequent a dealer more often, and also report spending nearly $100 more at a dealership in the past 12 months than those who did not purchase additional coverage.

“By maintaining strong and positive relationships with customers who purchased a service contract, dealers have much to gain,” said Osborn. “Customers who purchase additional coverage are more likely to repurchase from or recommend the dealer who serviced their vehicle, particularly when customer satisfaction is high.”

The study finds that among luxury brands, Acura, Cadillac, Infiniti and Lexus perform particularly well in satisfying customers with the service experience after four years of ownership. Among non-luxury brands, Buick, Chevrolet and Saturn perform well. Goodyear Tires performs above average among non-dealer service facilities.