In part one of this two part series, we addressed the overall trends of our dealer clients. In this installment, we will further analyze trends for dealerships based on the size (determined by total dealership sales dollars) of our dealer clients. By doing so, dealers will be able to gauge their results against like-sized dealerships. We have categorized the dealerships as follows: small (<$15 million), medium ($15-25 million) and large (>$25 million). Analysis is based upon results for the nine months ended September 30, 2013 compared to September 30, 2012.
| Small | Medium | Large | |
Average Increase in Overall Sales$1.4 million$1.6 million$3.4 million
Average Number of New Units Sold (through 9/30/13)187360817
Average Increase in Number of New Units Sold173973
Average Increase or (Decrease) in Gross Profit per New Unit (excluding F&I)(21)(60)(44)
Average Increase in Number of Used Units Sold (Retail)121240
Average Increase or (Decrease) in Gross Profit per Used Unit (excluding F&I)0(157)(98)
Average Increase in Service Sales$36,000$90,000$180,000
Average Gross Profit % of Service (through 9/30/13)
61.82%63.75%65.23%
Average Increase in Parts Sales$21,000$99,000$254,000
Average Gross Profit % of Parts (through 9/30/13)31.60%31.47%31.60%
% of Increased Profitability (through 9/30/13)45%78%75%
Average Increase in Profits (through 9/30/13)$2,500$84,000$159,000
Average Dealership Profits (through 9/30/13)$190,593$376,638$985,345
As evidenced by the chart, all categories experienced growth in each sales class. All categories continue to struggle with declining margins on vehicle sales. Larger dealerships have continued to maintain their advantages.
Dealers in the large category are able to take advantage of their higher sales to absorb their personnel, semi-fixed and fixed expenses. Many of the stores in the large category own multiple dealerships. Their increased purchasing power allows them to negotiate better pricing from their vendors, especially in the areas of advertising, floor plan interest rates, and IT and software costs. They also have lower personnel expenses as a percentage of sales. A large store with five times the sales of a smaller store typically would only have twice as many administrative employees.
It is no surprise that large stores generate significantly higher profits. Small and medium dealerships need to remain vigilant in managing their businesses in order to maintain profitability and to remain competitive with the larger stores.
If you have any questions, please contact Paul McGovern at 800-849-6022 or PMcGovern@DowneyCoCPA.com.
