Production delays caused by the computer chip shortage have been well documented. Rows of empty spaces on their lots are a daily reminder to dealers. Not only have new vehicle sales trailed 2021 (down 13.6%) but have yet to reach the levels of 2020 (down 4%). On a national level, the hardest hit were the imported brands, especially Honda and Nissan.
New Unit Sales Volume
- Virtually all of our dealer clients saw new unit sales decline from 2021. On average, they sold approximately 100 fewer units as compared to the same period last year.
- On average, unit sales for our dealer clients dropped approximately 21%. This is far above the national average of 13.6%. In contrast to national averages, our domestic dealer clients fared worse (down 24%) than those carrying import lines (down 20%).
Profits on New Vehicle Sales
- On the plus side, 88% of our dealer clients reported an increase in overall gross profit dollars in spite of the drop in unit sales. On average, gross profit dollars increased a whopping 40.7%.
- On average, dealer clients generated a previously unheard of gross profit percentage of 9.81%, easily surpassing the 2021 record of 6.21%. In context, 2020’s average was 3.22%.
F&I Income
- As one might expect, nearly 63% of dealers reported a drop in F&I income as compared to the prior year.
- However, on a per unit basis, 81% of dealer clients earned more F&I income per unit sold than in the prior year.
Profitability – By the Numbers
| 2022 | 2021 | 2020 | |
| Gross Profit/Vehicle | $4,475 | $2,796 | $1,432 |
| F&I Income/Vehicle | $1,442 | $1,244 | $1,053 |
| Combined/Vehicle | $5,917 | $4,040 | $2,456 |
As the above chart illustrates, dealers are enjoying historical profits on each vehicle sold. F&I income continues to grow on a per unit basis. These are all positives for dealers. Yet dealers are aware that the margins on new vehicles can’t be sustained. Production delays will resolve. Early estimates indicate that vehicle production will ramp up to pre-pandemic levels in 2023. Rising interest rates will also come into play. Many consumers focus on the monthly payment. In order to get to the monthly payment that a customer is comfortable with, dealers will need to come down on the sales price and may not be able to sell as many F&I products . A dealer client with multiple franchises has indicated that the average monthly loan payment at their stores has increased from $400 to $700 over the past six months. Coupled with rising inflation, consumers may be hesitant to buy at the current prices. Dealers will need to manage their new sales department with this in mind.
If you have any questions regarding this article, please contact Charlie Paolino at CPaolino@DowneyCoCPA.com or at 800-849-6022.
