This article is part 2 of our annual series analyzing the results of our dealer clients for the first nine months of 2019 compared to 2018.
As we touched upon in our previous installment, new vehicle year to date sales have dropped nationally compared to 2018 by 1.6%. Based on this trend, many analysts believe that new vehicle sales will not surpass the 17 million vehicle threshold for 2019.
New Unit Sales
- Overall, our dealer clients experienced a 2.6% decrease in unit sales.
Vehicle Profitability
- 69% of dealers reported declines in their gross profit dollars from new vehicle sales.
- Our findings indicate that our dealers averaged $1,003 in gross profit per vehicle, a decrease of $94 from 2018.
- In comparison, 2018 gross profit per vehicle was a decrease of $92 from 2017.
F&I Income
In recent years new unit gross profits declining, dealers have relied on strong Finance and Insurance (F&I) income to close the gap. Here are this year’s results:
- 52% of dealers reported an increase in F&I income per unit sold.
- On average, F&I income grew by 1.7%.
- F&I income averaged approximately $936 per vehicle, an increase from 2018 of $18 per vehicle.
Combined Profitability – Gross Profit Plus F&I
The following chart summarizes profitability on a per vehicle basis:
| 2019 | 2018 | Change | |
|
Gross Profit/Vehicle
|
$1,003 | $1,097 | $(94) |
|
F&I Income/Vehicle
|
$936 | $918 |
$ 18
|
|
Combined/Vehicle
|
$1,939 | $2,015 | $(76) |
The results highlight the trend facing dealers. The dwindling margins on unit sales had, in recent years, been mitigated by growth in F&I income. Profits from the F&I department appear to be leveling off. With declines in unit sales projected for 2019 and beyond, dealers need to remain vigilant on holding gross profit margins on new vehicles and manage their F&I department to ensure maximum profitability from it.
If you have any questions regarding this article, please contact Charlie Paolino at CPaolino@DowneyCoCPA.com or at 800-849-6022.
