We have analyzed the operations of our dealer clients in 2015 and observed the following trends:
Profitability
Almost all of our clients increased their profitability in 2015. Many achieved record profits.
New Vehicles
New vehicle sales grew on average by 5%. The increase can be attributed to a growth in truck sales. New car sales actually declined in 2015. The continual trend of lower gross profit per new vehicle sale was reversed. Our clients generated $100 in higher gross profit per unit over 2014. The gross profit from F& I grew by $50 per unit in 2015. When you combine the F & I income to the gross profit on the vehicle, the F& I is accounting for 43% of the total gross profit. Domestic brand’s sales grew the most as they rely heavily on truck sales. Will truck sales dominate again in 2016?
Used Vehicles
Used vehicle sales were flat in 2015. The gross profit from the unit and F & I were almost identical to last year. This is typical in a robust year for new vehicle sales. It is increasingly difficult to grow the used vehicle business in an environment of low interest rates, significant manufacturer discounts on new vehicles, and attractive leasing programs.
Service and Parts Department
Increased vehicle sales in recent years has led to a growth in the parts and service departments. Over 80% of our clients grew the sales in these departments. Both departments also recorded increases in the gross profit percentage. Make sure your store is growing the service and parts business in line with the increase in vehicle sales which you have seen in recent years.
Expenses
With an increase in sales, expenses grew. The bad news is that expenses outpaced the growth in sales. It is easy to lose track of expense control in a year that all departments have increased their sales.
Vehicle sales forecasts are strong for 2016 as well. Dealers that stay focused may see another year of record profitability. Focus on your parts and service departments, as dealers tend to neglect these departments when vehicle sales are strong.
If you have questions regarding this article, please contact Paul McGovern at 800-849-6022 or PMcGovern@DowneyCoCPA.com.
