| For most of this year, new unit sales have been slightly ahead of the comparable period for 2017. As of September, unit sales were up .5% compared to the same period last year. Industry analysts predict that 2018 will continue the trend of surpassing the 17 million vehicle level.
Data
Our results are based on the compilation and analysis of our dealer clients’ financial statements for the nine months ended September 30, 2018, compared with the same period from the prior year.
Profitability
- On average, dealers experienced an increase in net profit of 1.8%.
- Larger dealerships and dealer groups outperformed smaller dealerships. Many of the smaller dealerships experienced a decline in net profits.
Overall Dealership Total Sales
- Nearly 70% of dealerships reported increased sales, and of those 34% reported increases greater than 10%.
- In comparison, 2017 results showed that 57% of dealerships experienced overall sales growth.
- On average, overall dealership sales increased 4.75%. The 2017 results showed a 3.8% increase from 2016.
Expenses
- 50% of dealers saw their variable expenses increase. This has a direct correlation to the dealership’s ability to generate margins from its vehicle sales.
- Personnel expenses have increased for more than 75% of dealerships. A strong economy coupled with low unemployment rates make for a competitive environment. On average, personnel costs have increased 3.5%.
- Semi fixed expenses continue to rise with nearly 65% of dealers experiencing increases. Many dealerships categorize floor plan interest and advertising in this category. Rising interest rates have driven the cost of funds higher. Semi fixed expenses have increased on average over 4.5%.
- Over 82% of dealerships experienced an increase in fixed expenses. Overall, fixed expenses have had an average increase of 8.25% compared to a 4.25% increase in 2017. One of the main factors is a jump in rent and related occupancy expenses caused by recent facilities upgrades.
While a significant number of dealers continue to see dealership sales grow, rising costs and shrinking margins has kept profitability for many dealerships static. Successful dealers must continue to focus on increasing the top line and managing expenses in order to improve their bottom line.
If you have any questions regarding this article, please contact Charlie Paolino at CPaolino@DowneyCoCPA.com or at 800-849-6022. |
