How the Recession Affects Independent Auto Repair Shops

A recession is bad news for most industries. During a recession, people earn less and spend less. That means fewer jobs and lower wages, contributing to a virtuous circle. While few industries are recession-proof, there are some that are.

Does the auto repair shop belong to these industries? The answer is yes, but that doesn’t mean the industry is unaffected. For every person who sticks with their vehicle longer (which brings in more revenue for the garages that service them), there is another person who puts off a necessary repair because they can’t afford it. Because even the economists cannot really predict what will happen under the current circumstances, nor can we be sure how an upcoming recession will actually affect us.

And it’s entirely possible that the regional or local impacts are much larger than the overall national impacts. In short, auto repair shops who are best surviving during the recession are those who understand how customers and communities are being impacted and are adapting their services to help them meet their current challenges. This isn’t a wordy way of saying that you should lower your prices if necessary, it’s still just one component of an effective response.

Here are three things that happen during a recession and what you can do to manage them.

1. Consumers are less able to handle large purchases
When recessions hit, many consumers are forced to draw on savings to cover large expenses, if they have any savings at all. This is due to job losses and a reduction in working hours for hourly workers. Consumers are also less likely to have large lines of credit as credit standards tighten during recessions. Selling maintenance plans and emphasizing warranties helps consumers feel confident they’re avoiding spending they can’t afford and ending up without transportation.

2. People hold on to cars longer
People don’t want to make big purchases during a recession, so they hold on to cars rather than trade them. Remember cash for clunkers? It was a vehicle trade-in program funded by the government during the late 2000s recession. The program was intended to boost the economy by encouraging people to trade in their old vehicles, partly because dealers had suffered badly when selling them. That people are holding onto older vehicles is good news for independent garages as these older vehicles need to be serviced to stay on the road. However, to really reap the benefits, you need to invest time in customer education. Customers must believe that the trade-off between short-term maintenance and long-term reliability is real, or they can choose to postpone maintenance. If a part shows wear, make sure you show the customer what a worn part looks like and what a new part looks like. Give customers an honest explanation of what could reasonably happen if they don’t take preventive steps and give them the choice, once they understand the consequences they might reconsider their decision to wait.

3. Consumers start cutting costs
During recessions, new business models often overtake old ones. Some stores may be tempted to start a race to the bottom by lowering their prices to try to get customers to the door. While customers may not appreciate the affordable quality of parts and service they get for the cheaper price, a product like this is poised to take off during a recession when people are looking for easy ways to cut costs reduce. If your customers are perusing their bank statements looking for monthly transactions to cut, will your business stand out as a cost-cutting opportunity? That may depend on whether they view your store’s service as a cost or as an investment. Do your customers understand and appreciate the value they derive from having a home for their car serviced by technicians they trust? Every time you present customers with information about their vehicle that will help them make good future decisions, remind them what they will lose by switching to the cheapest alternative in town.

Take advantage of the opportunities you get to influence and connect with customers because you’re not likely to be a part of the conversation when they decide whether price-shopping for cheaper shops is worth it when they’re in a financial pinch! Obd2tool may be a good choice for you, we provide powerful diagnostic tools at affordable prices.