Charging for environmental disposal – are you missing out?

Legislation and industry directives on ‘environmental’ issues now affect every automotive business in one way or other. However, there are increasing costs associated with disposal of materials such as lubricants and specified parts. 

ADP experience has shown that at the present time many dealers are not recouping the cost of disposal even though environmental charging is accepted by most customers. The service departments’ profits are reduced every time the incurred costs are not passed on. There is a simple solution. Such charges can be easily enforced if they are positioned better. Customers expect businesses to be socially responsible and although the dealership provides a disposal service, it is doing so on behalf of the vehicle’s owner who rightly should contribute.
 
‘A tyre disposal charge is now becoming an accepted aspect of the cost of a new tyres – currently at about £1.00 per tyre but this may rise as landfill disposal is eliminated.’
Association of Tyre Recycling Specialists

‘Waste disposal specialists have to maintain licenced vehicles, premises and facilities appropriate for the materials being handled and make the necessary collections garages and servicing points who themselves incur significant costs in meeting their obligations.’
Automobile Association  - message to consumers

The facts
ADP customer research asked dealers what they perceived as being the key drivers in the unstable climate, the following quotes encapsulates the responses: 
“Irrespective of the manufacturers discounts, we feel that the aftersales areas must increase their contribution to the dealerships’ cost absorption.”

“Service will suffer until the new car market returns. Need to really control costs for 12 plus months.”

To reinforce these findings, 51% of the group expressed concerns about the profitability of the service department.

Charging for environmental disposal – ADP customer benchmarking exercise 
ADP set out to identify how their benchmark group calculated and applied environmental charges and to what extent the group used the tools available in their dealer management system to process this:

1. What is the level of system-based setup and usage for:
– the range of environmental charge labour codes
– the use of these codes in the fast track parameters
– whether sundries was ‘active’ – i.e. enforced charging

2. What is the level of activity for:
– the number of invoices with an environmental charge applied
– the average amount charged per invoice

Conclusions
- The use of the ‘Sundries Active’ tool by the benchmark group was non-existent.
- The percentage of retail work that had sundry charges applied is very low typically 25% or less.
- There is a process opportunity to increase the consistency of applying sundries to make it quicker and easier to apply. 
- A huge variation exists in the value of sundries that are applied to repairs amongst the benchmark group.

How can the Autoline dealer management system help?
By setting up the environmental charges so that they are invoiced automatically they will not be overlooked at the point of invoicing. Autoline has a facility that will override the charges, available to high priority users. The system has the flexibility to vary the amount charged based on parts/labour content and value. 

In addition, within Autoline, as the charges are managed at a central level, it is straightforward to measure and report on the success of the environmental charges.

In conclusion, the implications for a dealership are clear. A straightforward automatic invoicing process, such as that available in Autoline, represents a quick and easy path to greater profitability.