Dealers are finding ways to squeeze every bit of profit out of their service departments. We were interested in whether asking for deposits on equipment brought in for repair might be one strategy. However, according to a recent Rural Lifestyle Dealer poll, only 12% of dealers ask for deposits.
Several dealers that do have a deposit policy shared their practices. Read their ideas and see if they might be adapted for your dealership.
“We ask for deposits only on 2-cycle equipment. We ask for $35, which is a half hour at our current labor rate of $70 per hour. This is non-refundable, but is applied to their bill if we repair the unit. We don’t always take the deposit, but it is a good way to make sure we don’t put time into something that is junk and the customer never comes back to pick it up. It also deters customers from leaving very cheap equipment here that is not worth repairing.”
— Jaron Weaver, Weaver’s Equipment, Vineland, N.J.
“We have collected a diagnosis fees for checking in equipment during my 17 years as owner. We collect the fee even if the customer believes it is warranty because we don’t know up front if the repair is covered until we actually diagnose the unit.
“The diagnosis fee will be returned if the repair is determined to be warranty. If you call it a deposit, then the customer is of the opinion that it will be returned. The diagnosis fee is the minimum charge to the customer and that fee gets you a repair estimate. If the customer does not have the work done, they can choose to pick up the unit or have us dispose of it. If they authorize the work, the fee is then applied to the final bill for repairs, etc.
“We don’t want the customer’s unit in exchange for the diagnosis and if we did not charge the fee they would abandon it without paying for the work. We want to be paid for any work that the mechanic has done for the customer and we want to secure the work as a repair or do the required maintenance. If no fee was charged, we would have done the diagnosis for free.”
— David Wood, Smitty’s Lawn & Garden Equipment, Olathe, Kan.
“We specialize more in semi-trucks and trailers and heavy/ag equipment. However, we have a general rule of thumb about asking for deposits if the customer is a cash client, doesn’t have a credit account set up already, or the account credit limit is too low.
“Typically, if the parts will be more than $1,500 (and we don’t stock the parts) we’ll ask for payment for parts only up front and then bill labor after the job is complete. This is usually weighed with some subjectivity depending on the customer, previous payment history, etc.
— Matthew Tomberlin, Carolina Ag & Equipment Group, Monroe, N.C.
Do you have other practices that work well for your dealership? Let’s keep the conversation going. Share your comments below.