Auto Dealership Trends for the First Eight Months of 2017

After visiting several clients this summer and analyzing their year to date financial statements, I have compiled the following observations as it relates to the current year:

• New vehicle sales are off slightly for most dealers.
• Grosses on new vehicle sales continue to slide.
• Many dealers are compensating for the lost gross profit on the front end by increasing the F & I income per unit sold.
• The F & I department is critical to the profitability of the front end of the store.  Luxury dealers are increasing their efforts in F & I.
• BDC centers are helping dealers to gain sales, but the costs of running the department are burdensome.  Dealers must pay the normal commissions to sales staff, and cover the cost of the BDC center.  Many brands also require dedicated delivery/product specialists.  When you add up all of these costs in the new vehicle area it is difficult to turn a profit in the department.
• New vehicle inventories are rising.
• Pressure from the manufacturers to sell new vehicles is hurting the used vehicle sales.
• Parts and service sales are marginally higher than last year.
• The gross profit percentages are improving in the parts and service departments.
• Expenses are growing, especially floor plan interest.
• Manufacturers are requiring dealers to create/increase their loaner fleets.
• Overall profitability is strong, but lower than 2015 and 2016.
• Dealers are receiving unsolicited offers from other dealers to purchase their stores.

In conclusion, dealerships require increased attention to details to maintain profitability.  Strong stores are meeting these challenges.  Weaker store are struggling with the increased complexity in the business and profits are sliding.