- Dealership year to date profits are higher than last year.
- Growth in parts and service revenues is responsible for a significant portion of the profit growth. The continued growth in vehicle sales over the past four years is feeding these departments.
- Dealers are selling more new units but the gross profit per unit continues to decline.
- A key factor in generating profits in the front end of the store is maximizing opportunities in the finance and insurance department.
- F & I managers are critical to a store’s profitability and these managers are often the highest paid employees in the dealership.
- Dealer owned reinsurance companies are building significant personal net worth for our clients that are taking advantage of this structure.
- Manufacturers are pressuring dealers to take more inventory and many dealers are accepting higher levels of new vehicle inventory. The day’s supply of new vehicle inventory is building.
- Dealers are under intense pressure to renovate their stores in accordance with manufacturer standards. In some cases, dealers that renovated five to ten years ago are already out of compliance. Manufacturer incentive programs are tied to facility compliance.
- Successful dealerships produce accurate monthly financial statements and have a competent office manager.
- Managing used vehicle inventory ageing is one of the most important factors in maintaining a successful used vehicle department. Profitable dealers maintain a 45 to 60 day supply. Retail units should be reconditioned and available for sale in 5 days or less.
- A well designed internet advertising program is critical to the used vehicle department.
The above insights are a reflection of our recent discussions with our dealer clients and our review of their most recent financial statements. The strong demand for vehicles has allowed many of our clients to generate record profits in 2014.
If you have any dealership management questions, please contact Paul McGovern at pmcgovern@downeycocpa.com.
