Weak economy pushes consumers to spend less on vehicle repairs: J.D. Power - Metro US

Weak economy pushes consumers to spend less on vehicle repairs: J.D. Power

TORONTO – A new study suggests Canadian car and truck owners are spending less on maintenance and repairs than they did last year in yet another example of consumer belt-tightening.

The study, released Tuesday by consumer survey firm J.D. Power and Associates, found average annual expenditures on vehicle maintenance and repairs shrunk to $856 in 2009 from $920 in 2008 – down seven per cent.

The results came as a surprise to the head of J.D. Power’s Canadian automotive practice, who assumed the recession would push consumers to keep their vehicles for longer and therefore spend more on repairs.

“Definitely the conventional wisdom holds that in these kinds of difficult economic conditions, that with new vehicle sales down this year, the average age of vehicles is starting to creep up, therefore people must be spending more to keep those vehicles on the road,” said Darren Slind, senior director and Canadian automotive practice leader at J.D. Power.

Instead, Slind said vehicle owners seem to be deferring non-essential maintenance to save money.

“So whereas they may have replaced their tires, for example, when they were starting to get a little bit worn, now they’re maybe waiting until they are worn, or they’re lengthening the cycle in between oil changes,” Slind said.

However, Slind said he doesn’t think this trend is sustainable and expects it to reverse by early 2010, as minor maintenance issues can eventually turn into safety issues that can’t be ignored.

The J.D. Power survey also found that price-conscious consumers are increasingly turning to aftermarket service providers – or mechanics that aren’t affiliated with a specific automaker – rather than new-car dealers for their maintenance work.

Aftermarket providers now account for 59 per cent of the $11.2-billion annual service market for vehicles between three and 12 years old, up from 57 per cent in 2008 – a shift worth more than $220 million.

This is not a new trend and is primarily due to positive customer experiences at aftermarket shops versus dealerships, J.D. Power found.

And a move by major automakers like General Motors and Chrysler to reduce the number of dealerships will further strengthen the aftermarket, said Marc Brazeau, president of the Automotive Industries Association of Canada, which represents auto-repair shops.

“The demand may fluctuate from year to year, but demand will continue to grow because there will be more and more vehicles on the road,” Brazeau said.

“There will be less car dealerships in existence and therefore consumers will be looking to the aftermarket to fulfil their future needs and requirements when it comes to vehicle service and repair.”

In addition, dealerships’ primary source of service revenue is from customers with vehicles under warranty. As consumers choose to keep their cars and trucks for longer in response to the weak economy, this will hurt dealers’ share of the service market, said Michael Hatch, chief economist at the Canadian Automobile Dealers Association.

“As the average life of a vehicle goes from nine or 10 years to 12 or 13 years, obviously a greater percentage of the life of the average vehicle will be out of warranty,” Hatch said.

“So as that continues to be the trend, I would expect that the aftermarket will continue to increase its share, as long as warranties don’t keep pace with the average life of vehicles.”

Slind confirmed that most consumers shift from having their car serviced at their dealership to an aftermarket shop at the three-year point, when many warranties expire.

“That’s a very interesting reality and challenge for the dealers, because at three years, it’s a pretty critical point,” Slind said.

“That retention challenge once the warranty does expire becomes even more of an uphill battle. In other words, once you lose them, it’s very difficult to get them back.”

J.D. Power’s 2009 Canadian Customer Commitment Index Study is based on responses from 14,388 car and truck owners across Canada whose vehicles are between three and 12 years old.

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