This article is part 3 in our annual series analyzing the results of our dealer clients for 2017 year to date versus 2016.
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Statistics gathered regarding used vehicle sales indicate that the first nine months of 2017 have exceeded 2016 sales by a few percentage points. It is projected that there will be over 39 million used retail units sold in 2017. The used vehicle sales increase has been driven by the strength of certified pre owned vehicles, which recorded a 6% increase in September 2017 versus 2016. The demand for trucks and SUVs remains strong. The following are the results from our dealer clients.
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Unit Sales
- 56% – Percentage of dealers who experienced an increase in 2017 versus 2016.
- 3.3% – The average increase in used vehicle sales.
- $21,664 – The average sales price of a used vehicle in 2017 compared to $21,809 in 2016, a decrease of $145. The average sales price of our dealer clients is higher than the national average.
Profitability
- 55% – Percentage of dealers reporting a drop in used vehicle gross profit margin.
- .5% – The average decrease in the gross profit margin percentage from 7.5% in 2016 to 7.0% in 2017.
The following chart summarizes profitability on a per vehicle basis:
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2017
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2016
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Change
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Gross profit/vehicle
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$1,443
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$1,529
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$(86)
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|
F&I income/per vehicle
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$962
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$ 936
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$ 26
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Combined/vehicle
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$2,405
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$2,465
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$(60)
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In spite of increased unit sales, the gross profit per vehicle has dropped. Off lease vehicles continue to pour into the market. They are typically 1 to 3 model years old and are attractive to consumers. However, they have created an inventory glut causing dealers to sacrifice gross profit in order to make a sale. It is difficult to merchandise used vehicles when the pricing of new vehicles is so attractive.
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As overall profitability on used retail vehicles continues to tighten, it is important for dealers to keep a close eye on this department. Smart purchasing, continued refreshing of used inventory, and sales of aftermarket products are the keys to maintaining profitability.
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If you have any questions regarding this article, please contact Charlie Paolino at CPaolino@DowneyCoCPA.com or at 800-849-6022.
