Sparesbox Blog

Why the Dealer NEEDS to Rip You Off on Your Car Service – An Insider Guide

By Brad Nash

Tue Mar 14 2017

We all know the game by now. You head to your dealer to get your car serviced, you leave paying a healthy markup on pretty much everything, then you tell yourself that it’s okay because at least you got everything done through the proper channels. Even so, you don’t leave with a sense of total ease at what you’ve paid for. You feel like you’ve probably paid too much. Well, we can tell you right now that you absolutely have.


First of all, it’s important to know that neither dealers or manufacturers are generally making all that much on the cars they actually sell. Most of the time, a car has been sold to the dealership for a price that’s eye-wateringly cheap, and sometimes even at a loss. Whatever slim profits have been made selling it on to you go straight to the dealer, which is why car dealerships pretty much always stay open no matter what dire straits the manufacturer itself may be in.


There are a few reasons for this. They make them at high volume, they make cars on a huge scale. The parts going into them are made all day long, and those making them don’t make 10 or 20 different parts in a run, so they can just get them out at really cost effective prices. Once a part finally gets to a dealer, it could be 10 times more expensive than what the manufacturer paid to put it into the car at the factory.


The most annoying part of all this is that there’s no real difference between a genuine part, an OEM supplier part, or an aftermarket part of the same quality. The AAAA (Australian Automotive Aftermarket Association) has made it their job to be very clear on this. OEM Supplier branded parts, which you can source yourself, are defined by them as being the “same part, from the same factory, in a different box”, while independent aftermarket parts are generally “similar quality, fit for purpose parts that have the same functionality as a genuine part” with your manufacturer’s logo on the box. You’re not paying more for any additional quality or longevity. The reason car makers and dealers keep getting away with it? Well, it’s essentially how they survive.


Anyone who’s ever taken a trip to an office supplies store will tell you that most of the time, it’s cheaper to buy a printer with ink cartridges (even if they are half-full) than it is to buy the full cartridges themselves. A trip to the dealer is set up to hit your wallet in exactly the same way. Often, car makers can make some of this back by selling premium models for more money, but when it comes to squeezing profits out of their cars, the answer lies in charging as much as they feasibly can for the components that make them up. Speaking to Leon, Sparesbox managing director who once worked as a parts buyer for two of Australia’s biggest car brands, he sums it up pretty well.


“Similar to how you buy your printer, car companies rely heavily on the aftermarket sales and service of vehicles to generate long term recurring profits, simply because they don’t make money on a new car sale. When I started the job I was surprised to see just how low the price of components are at the original equipment level when they’re put into the car for the first time. It really is mindbogglingly low.


You would have seen probably many examples where people have made a car up from spare parts and they’re three, four, five, six times more expensive than the car would cost.”


This is why it’s way harder than it should be to know whether or not you’re getting your money’s worth on anything. Why was that factory oil change $80 before labour when a bottle would cost $50 down at your local shop? That small sensor can’t really be worth $200 to replace can it? Generally it doesn’t. And car manufacturers make millions a year by ensuring that most people have absolutely no idea how the game is set up to make sure the house always ends up winning, despite the fact that you can pretty much always source the same parts, or parts of equivalent quality, yourself for way, way less.


The AAAA is just as mad about this as we are, and they’re quick to dispel any myths that getting your parts from other places can affect your vehicle’s service life in any way.


“If the parts you fit are of equivalent quality then they should not have any effect on new car warranty. They also come with consumer guarantees in Australian consumer law, and provide a signficant price advantage.”


Ultimately, this filters down into your dealership service quote. Your labour costs may go towards actually paying the mechanics servicing your car, but a huge chunk of what you pay for parts is going towards inflating the bank balance of your car’s manufacturer. Everything about this, says the AAAA, is due to the dealers “perpetuating a myth that a car owner must use an authorised repairer and fit ‘genuine parts’ to preserve their manufacturer’s warranty”.


Ultimately, the car service industry is always going to be one that’s hard to filter the right information out of. Above all, that’s what we think needs to be changed. It’s the product of old-fashioned thinking and a desire to stick to the status quo that’s outlasted just about every other industry across the decades. If the auto industry was more adaptable, it wouldn’t have to overcharge people to make a profit. These days, doesn’t.