2020 has been an eventful year for dealers as it relates to new vehicle sales. Nationally, new vehicle sales have dropped by approximately 18%. While the past five months have rebounded from the lows of March and April, they still lag behind the unit sales for 2019 on a year to date (September 30) basis.
New Unit Sales Volume
- Not surprisingly, over 81% of our dealer clients reported a decrease in unit sales.
- Based on our dealer client information, they have experienced a 14% decrease in the number of units sold on average.
Profits on Vehicle Sales
- Counteracting the decrease in unit sales has been a significant increase in gross profit per vehicle sold.
- 57% of dealers reported an increase in overall gross profit dollars compared to 2019.
- Over 71% of dealers saw their gross profit per vehicle increase in 2020. In contrast, only 31% reported an increase in 2019.
- Our results indicated that dealers, on average, generated $1,403/vehicle compared to $1,182/vehicle in 2019, an increase of over 18%. This is a marked change from recent years where dealers saw their gross profit per vehicle shrinking. 2019 and 2018 reported decreases of 8.6% and 7.7%, respectively.
F&I Income
F&I Income remains a profit center that dealers have made a greater focus over the past number of years to combat declining margins on new vehicle sales. Let’s see how they have fared:
- Over 77% of dealers reported an increase in F&I income per unit sold.
- On average, dealers earned $1,053 in F&I per vehicle sold compared to $950 in 2019.
- That represents nearly an 11% increase year over year compared to only a 1.7% increase from 2018 to 2019.
Profitability – By the Numbers
| 2020 | 2019 | Increase | |
| Gross Profit/Vehicle | $1,403 | $1,182 | $221 |
| F&I Income/Vehicle | $1,053 | $950 | $103 |
| Combined/Vehicle | $2,456 | $2,132 | $324 |
While unit sales have declined in 2020, dealers have been able to generate much stronger margins. With dwindling inventories due to pandemic related factory shutdowns, consumers have fewer choices and are less likely to shop around. Additionally, with many dealers requiring an appointment for sales, these consumers are more apt to buy versus those that would normally just show up at the dealership. Dealers must continue to hold their margins while they can. It is expected that the new vehicle profits will experience a decline once factories return to full production levels and consumers can price shop amongst dealerships.
If you have any questions regarding this article, please contact Paul McGovern at PMcGovern@DowneyCoCPA.com or at 800-849-6022.
