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SERVICING: Pricing up servicing options

Date: 13 July 2010

In the check-list of ways to cut fleet costs, reviewing your servicing options is a good place to find savings. Tristan Young reports

An increasing number of fleets are switching their servicing from the manufacturer's franchised garage network to independents to take advantage of substantial cost savings.

Depending on which independent network you talk to, that saving could be anything from 24% to 60% less than a main dealer's prices.

So why would any fleet use a franchised dealer if it were that clear cut? The often-used arguments are that franchised outlets offer services that independents don't such as courtesy cars or collect and deliver. Plus, franchised dealers often claim that a car with a franchised service history has a stronger residual value than one with a service history from an independent.

Indeed there is some evidence of a residual value difference. According to research from residual experts Cap, the RV effect is present and works in favour of franchised dealers. It can be about £300 on a 3-series over three years and 60,000 miles. However, Cap add that while there may be an RV advantage to sticking with a franchised garage, this may be offset by the saving on the servicing costs of using an independent. A Cap spokesman concluded that fleets will need to do the calculations to see which offers the biggest win.

The RV gap is also acknowledged by UK operations director Simon Henstock of auction company BCA. Commenting on the effect a franchised history can make he says the difference can be higher than £300: "It can make a great deal of difference if a fleet car is sold with a supplying dealer service history, or an independent-supplied service history.

"While a lot depends on the make and model, age and mileage, in every case the value is likely to be enhanced if a car is offered with a main dealer history, as opposed to an independently serviced car. On a high-value prestige brand such as BMW, Mercedes-Benz, Audi or Jaguar, the market would value that at least between £500 and £1000 on a £20K car - if not more.

"On performance cars, a main dealer history is absolutely vital - for Ferrari, Porsche and Maserati a full service history could represent 15% or 20% of the value on a £50,000 car, making the service history worth as much as £7500 to £10,000. Similarly, a Mini service is valuable on Mini product, and non-Mini history would de-value the car.

"Main dealer servicing is perhaps less important on mainstream brands but still adds value, maybe £250 to £300 more on a typical £7000 volume fleet car or van, compared to an independently serviced vehicle."

Henstock adds: "If a car has just had its major service (around 70,000 miles usually) buyers will value it more if it was done by the same franchise or supplying dealer. On higher mileage cars, it is probably less of a value enhancer, but might be a deal maker - a 150,000-mile Mondeo with a full Ford service record has a ring of desirability about it, compared to a similar car with a varied service history."

While rival auction firm, Manheim, agreed with BCA's sentiments, it did not have hard statistics on the exact worth of a franchised dealer service history. However, a spokesman for the firm said: "A car with a full, documented service history including the use of manufacturer-supplied/approved parts will always be more attractive to buyers. For prestige brands a franchised dealer stamp will add value."

Unsurprisingly the independent garages are sceptical of any evidence that there's an RV difference.

Mike Wise, boss of Kwik-Fit Fleet, 17-times BusinessCar Award winner, says: "The advantage on residuals of a manufacturer-stamped service record has yet to be proven.

"I'd be amazed if a potential buyer of a defleeted car would pay more for a manufacturer-stamped service record. They are only concerned that the servicing has been done to the same schedule and same standard as a franchised garage.

"The manufacturer's stamp is nonsense. Perhaps with a Mercedes or BMW people will feel happier buying a manufacturer-serviced car, but I doubt they'd pay a premium."

Wise, who claims Kwik-Fit is up to 24% cheaper than a franchised outlet, is also critical of the advantage in customer service levels that franchised dealers offer.

"We offer a collect and deliver service within 48 hours. We don't offer a courtesy car, but when the franchised dealers offer one, that's nonsense because there's always a star and small print that says 'subject to availability'. And there's never one available quickly."

Fellow independent garage boss Oliver Richmond, who founded Servicing Stop, which was featured on BBC TV's Dragons' Den last year, adds: "We offer collect and deliver service or, if required, a courtesy car for free.

"When we talk to new fleet customers we find that it's a lack of awareness of options outside the franchised network rather than any other issue that stops people choosing an independent garage."

Richmond also challenges the evidence that RVs are hit by having a non-franchised service history. "I've never seen any proof of the argument over RVs being an issue in the mainstream brands, although perhaps its an issue with prestige brands such as Porsche."

Duncan Wilkes, chief executive of Halfords-owned Nationwide Autocentre, offers precise cost figures for the difference between franchised outlets and his network. He claims, the average price charged for a full service by Nationwide Autocentre was £178.44 versus £227.13 at a main dealer for the past three months, equating to an average saving of almost £150 per car over three years.

He adds: "Last year we carried out more than 175,000 fleet jobs, the bulk of which were servicing cars under three years old. Fleet business is currently growing more quickly than our retail business, and is responsible for around 25% of turnover. I'd anticipate this increasing to around 30% in the next three years."

In defence of franchised garages, Retail Motor Industry Federation director Sue Robinson points out that many brands are now fighting back with fixed-price servicing for fleets: "Franchised dealers are upping their game and price matching - they're all trying to address the issue. And they're all price matching within their location on parts and labour." She added that a brand-specific garage would also have greater experience of that make: "Franchised dealers are fully trained by manufacturers to exacting standards to ensure vehicles are repaired and maintained to the highest possible standards. They have enormous experience of a franchise and its cars drawn on the fact that they service and repair these cars all day every day."

However, only individual fleets will know their current servicing costs and with each one having a different mix of vehicles it will pay to run the figures comparing each servicing route against how they value speed of booking, experience, up-front costs and RVs.