2011 Outlook for Dealers 

 

• US new car and light truck sales increased 11% in 2010.  Most analysts predict similar increases in 2011 as the economy and consumer confidence improves. 
• Manufacturers will aggressively pressure dealers to sell more units to increase their market share.  Manufacturers will continue to create tier based incentives based on monthly volume.  These tier based incentives will replace many of the traditional individual unit based incentives.
• Gross profits per new vehicle sold will continue to decline.
• Manufacturers will ramp up production and pressure dealers to take their inventory.  This is in contrast to 2009 and 2010, when most dealers were not able to acquire the inventory levels that they desired.
• Fewer off lease units will be available in the used vehicle market place in 2011.  This is a direct result of the low new vehicle sales volumes in 2008 to 2010.  This will create price pressures in the used vehicle market place.
• A greater percentage of used vehicles will be purchased and sold via online auctions.
• Credit markets will continue to loosen and dealers with higher interest rates will refinance or renew at lower rates.  General Motors will start or acquire a captive finance arm.
• Successful dealers will continue to focus on their service and parts operations.  A significant portion of dealership profitability will be generated from the "back end."
• Mergers and acquisition activity will increase dramatically in 2011.
• The growth of internet advertising and internet sales departments will continue.
• Many dealers will generate record profits in 2011. 

In conclusion, 2011 should be a strong year for dealers.  Most dealers have experienced significant expense reductions in recent years.  Keeping these expenses down while increasing sales will lead to a healthy bottom line.

If you have dealership issues you would like to discuss, please contact Paul McGovern at pmcgovern@DowneyCoCPA.com.