This article is part 3 of our annual series analyzing the results of our dealer clients for the first nine months of 2018 compared to 2017.
Statistics gathered on used vehicle sales indicate that the first nine months of 2018 exceeded 2017 sales by 2.4% for franchised dealers. It is projected that in total, 2018 will eclipse 40 million used retail units sold, surpassing 2017’s total of 39 million. The used vehicle sales increase for franchised dealers has been driven by the continued appeal of certified pre-owned vehicles, especially for trucks and SUVs. The following are the results from our dealer clients.
Unit Sales
63% – Percentage of dealers who experienced an increase in used unit sales in 2018 compared to 2017.
8.9% – The average increase in used vehicle sales dollars.
3.5% – The national average increase in used vehicle prices from 2017 to 2018.
5.1% – Average increase in used vehicle prices for our dealer clients.
Profitability
56% – Percentage of dealers reporting a drop in used vehicle gross profit margin.
.6% – The average decrease in the gross profit margin percentage from 7.0% in 2017 to 6.4% in 2018.
The following chart summarizes profitability on a per vehicle basis:
| 2018 | 2017 | Change | |
| Gross profit/vehicle | $1,316 | $1,391 | $(75) |
| F&I income/per vehicle | $1,016 | $989 | $27 |
| Combined/vehicle | $2,332 | $2,380 | $(48) |
As has been the trend the past several years, unit sales and sales dollars have steadily increased, while the gross profit per vehicle has continued to drop. Off lease vehicles and loaner vehicles brought into inventory have created a glut of inventory in the market. It is difficult to merchandise used vehicles when the pricing of leasing a new vehicle is so attractive. This drives down the margins for used vehicles.
Dealers must continue to follow the basic principles of running a successful used vehicle department – concentrate on purchasing the types of vehicles the dealer can sell using the various resources available to them (most notably software applications), understanding and managing inventory age, and emphasis on the sales of aftermarket products. These principles remain the keys to maintaining profitability in the used vehicle department. Dealers have also acknowledged that factory pressures to move new vehicles has diverted a significant amount of their time and effort away from the used vehicle department. It is imperative not to lose focus when it comes to the used vehicle department.
If you have any questions regarding this article, please contact Charlie Paolino at CPaolino@DowneyCoCPA.com or at 800-849-6022.
