As Repair Costs Rise, So Does Popularity of Service Drive Financing

Automotive News

Top service drive financing platform Sunbit sees more customers using their service to pay for vehicle repairs.

The cost of a vehicle repair is rising; therefore, so is the chance of customers getting hit with a hefty service department bill.

To ensure they don’t decline the work and to help them afford the repair, more dealerships are offering buy now, pay later service lane financing.

Not only does it give customers more Oexibility, the financing option also boosts customer satisfaction, dealerships said.

“A lot of people come to the service drive because now they know they have those payment options,” said Gabriel Perez, a service adviser at Nissan of Downtown L.A.

For the dealership, it also means giving customers more flexibility, he said.

Perez said he is the top salesman at Nissan of Downtown L.A. for Sunbit, a financial technology lending platform.

Founded in 2016, market leader Sunbit offers three- to 18-month service lane loans. Three-month loans are interest-free; longer loans have a personalized annual percentage rate, according to Sunbit.

Dealerships seem eager to offer the buy now, pay later option. Sunbit said its loans are now available in more than 50 percent of dealerships in the U.S., including the top auto groups and AutoNation. Shops pay a monthly subscription fee for the service. Sunbit takes a small percentage of the loans paid to the shop.

Part of the appeal is simplicity. Applying for a loan takes less than a minute, including a soft credit check, Sunbit said, and about 90 percent of loan applications are approved.

The process is very transparent, said Jon Meredith, national service operations senior manager for Volkswagen Group of America.

Volkswagen began offering Sunbit financing options in its dealership service lanes in 2019. Now more than 70 percent of Volkswagen’s 641 U.S. dealerships offer it, Meredith said.

The average amount financed at VW dealers is $1,000, which is about the same for all dealerships using Sunbit, said Tal Riesenfeld, the company’s co-founder and head of sales.

For up to 75 percent of customers, “had Sunbit not been there, they would not have fixed their car,” Riesenfeld said.

Inflation and higher parts and labor costs have pushed up the repair order amount, said Skyler Chadwick, Cox Automotive’s director of product consulting.

“Also, these cars are more expensive (and) there is more technology built in than before,” he said.

When just customer pay costs are considered, dealership repair rates on premium vehicles are rising at a faster rate than mass market, based on the most recent J.D. Power Customer Service Index report.

According to J.D. Power, the average amount spent on premium dealership service rose from $314 in 2023 to $380 in 2024, a 21 percent increase. For mass market brands, the amount rose 11 percent from $125 in 2023 to $140 in 2024.

DigniFi, which offers several buy now, pay later financing options through dealership service lanes, is seeing an increase in the volume of business because of the rising cost of repairs, said Freddie Garcia, senior vice president of business operations and customer care.

Consumers are holding on to cars longer and the price of getting those cars repaired is rising, he said.

“The [buy now, pay later] niche is growing and will keep growing, in my opinion,” Garcia said.

The average amount financed by DigniFi has risen from $2,050 in May 2023 to $2,137 in May 2024.

Previously DigniFi focused on independent repair shops. It is now more focused on serving franchised dealerships because a buy now, pay later loan “solves a problem” for them, Garcia said.

Dealerships were seeing customers who couldn’t afford a repair simply walk away, he said. The loan keeps the customer at the dealership and boosts customer loyalty.

A better customer experience
Uptake of the financing option is rising at VW dealerships, though the average amount financed has remained steady at around $1,000, Meredith said. He credits his service advisers “leaning into” letting customers know about it with growth in uptake.

The financing option adds to the service departments’ bottom line but also boosts CSI scores, Meredith said.

“What is important is we see the value in improved customer experience,” he said.

The Niello Co. dealership group in Sacramento, Calif., which has Acura, Audi, Jaguar, Land Rover, BMW, Mini, Porsche, Volvo and Volkswagen franchises, also sees offering buy now, pay later financing as a way to improve customer satisfaction.

Though repairs are getting more expensive, Niello hasn’t seen an increase in the use of the financing option, said Tully Williams, fixed operations director. In May, four people used Sunbit financing, he said: two financed for three months, one for nine months and one for twelve months.

Still, Williams considers offering the financing as a way to show his stores care about their customers.

“The money part of it is going to be the side note because we have the trust of the customer,” Williams said. “We are going to give them options.”