How Does a Recession Affect Independent Auto Repair Shops?

Feb 1, 2023

Most industries consider a recession as bad news. During a recession, people earn and spend less, resulting in fewer jobs and lower pay, contributing to a negative cycle. While very few industries are recession-proof, the Auto Repair Industry stands as recession-resistant. Is auto repair one of those industries? The answer is yes – but that doesn’t mean that the industry isn’t affected. How you respond to economic pressures on your customers can greatly impact your auto shop marketing in a recession.

One person holding onto their vehicle boosts revenue for maintaining shops, while another person postpones a needed repair due to financial constraints. Economic experts cannot accurately predict the outcomes under the current circumstances, leaving uncertainty about the pending recession’s actual impact. Additionally, regional or local impacts could potentially outweigh the overall national impact.

In short, thriving auto repair shops understand how customers and the community are affected, adjusting services to address current challenges. This does not mean merely lowering prices; it is just one component of an effective response.

Consumers are less able to handle large purchases

When recessions hit, consumers must dip into savings to handle large expenses, if they have any savings at all.  This is due to job losses and a reduction in hours worked for hourly workers.  Additionally, consumers are less likely to have access to large lines of credit due to tightened credit standards during recessions. To instill confidence and help them avoid unaffordable expenses, selling maintenance plans and emphasizing warranties becomes crucial, ensuring they do not end up without a means of transportation

People hold on to cars longer

People don’t want to make large purchases during a recession, so they hold on to cars instead of upgrading.  Remember “cash for clunkers”, the vehicle trade-in program funded by the government during the late 2000s recession. The program intended to boost the economy by encouraging people to trade in their old vehicles, in part because dealer sales continuously decreased.

Independent shops greatly benefit from people holding on to older vehicles since those vehicles require maintenance to remain operational. However, to truly capitalize on this opportunity, you must invest time in customer education. Customers must not delay short-term maintenance for long-term reliability.

If there’s wear on a part, make sure to show the customer what a worn part looks like and what a new part looks like. Provide customers with an honest explanation of what might reasonably happen if they don’t take a preventative step, and leave the choice to them. Once they understand the consequences, they might reconsider their decision to wait.

Consumers start to cut costs

It’s often during recessions that new business models overtake old ones.  Some shops may be tempted to engage in a race to the bottom by cutting prices to attract customers. However, customers might not value the lower-quality parts and service they receive. Despite this, such a strategy can gain popularity since people seek cost-cutting options during economic downturns.

Will your shop stand out as a cost-cutting opportunity when customers review their bank statements? That may depend on whether they view the service your shop provides as a cost or an investment. Do your customers understand and appreciate all the value they get from having a home for their car that’s staffed by technicians they trust?  Every time you present customers with information about their car that will help them make good decisions in the future, you’re reminding them of what they’re going to lose if they move 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!

Are you ready to thrive during a recession?