This article is part 2 in our annual series analyzing the results of our dealer clients for the first nine months of 2016 versus 2015.
Industry data indicates that 2015’s surge of auto sales has begun to subside slightly. Nationally, the month of September saw new vehicle sales drop by 1% compared to September 2015. Industry analysts predict new vehicle sales to be in the range of 17.4 million units, a slight down tick from the 17.5 million new vehicles (just over .5%) sold in 2015. We can see if the same holds true for our dealer clients.
New Unit Sales
- Overall, our dealer clients experienced a 2% drop in unit sales.
- Over 52% of dealers experienced a decrease in new unit sales.
- Those with declines sold 34 less units compared to the same period last year.
- Dealers with increased sales sold 35 more units year over year.
Vehicle Profitability
- Over 62% of dealers showed declines in their gross profit dollars from new vehicle sales.
- Our findings indicate that dealers averaged $1,060 in gross profit per vehicle.
- That translates into a drop in gross profit per vehicle of $85 from 2015.
- In comparison, 2015 gross profit per vehicle was an increase of $62 over 2014.
F&I Income
With the drop in new vehicle units, F&I (Finance and Insurance) income dropped as well.
- 60% of dealers reported a decline in F&I income.
- On average, F&I income fell by 3.5%.
- F&I income averaged approximately $830 per vehicle, a decrease from 2015 of $14.
- In contrast, F&I Income per vehicle in 2015 was $49 higher than 2014.
Combined Profitability
Decreases in both new vehicle profitability and F&I income translated to an overall decline in profitability from new vehicle sales.
- Combined profitability totaled $1,890 per unit for 2016, compared to $1,988 for 2015, a decline of $98.
- The decrease stripped away the gains earned in 2015 as dealers had reported an increase in combined profitability of $111 over 2014.
It comes as no surprise that new vehicle grosses continue to slide. Consumers are able to access more information about what new vehicles cost and what they should be paying, predominantly through internet searches. This hampers a dealer’s ability to negotiate the sales price of the vehicle. Also, dealers face pressure from the manufacturers to increase sales. This means extra importance is placed on the F&I department to generate higher income per vehicle to offset the shortfall in gross profit and should be a focus for dealers.
If you have questions regarding this article, please contact Charlie Paolino at 800-849-6022 or at CPaolino@DowneyCoCPA.com.
