Due to the overwhelming positive response we received to our trends and analysis newsletter for 2012, we have compiled information for 2013 from our dealer financial statements to again analyze various trends from year to year. This edition will focus on the overall results from our dealer clients.
Overall Sales
Over 85% of our dealer clients saw overall total dealership sales increase year over year. The average increase was $2.5 million.
New Vehicles
Approximately 76% of dealers sold more new units year over year with an average increase of 46 units. We anticipate an increase in units sold for 2014 as economic factors (low inflation, low interest rates, etc.) will sustain consumer confidence.
While a significant percentage of dealerships experienced an increase in unit sales, only approximately 27% were able to increase their margins on new vehicle sales. Average margins dropped from 4.6% in 2012 to 3.58% in 2013. Dealers saw gross profit per vehicle (excluding F&I) drop by approximately $43 per vehicle. Dealers grossed on average (excluding F&I) $1,073 in 2013 as compared to $1,116 in 2012. We would expect to see a slight erosion of margins in 2014 as consumers continue to use resources such as the internet to price shop vehicles.
Used Vehicles
Used vehicle sales have improved in 2013 as the availability of vehicles and wholesale prices have stabilized. Over 56% of our dealer clients experienced an increase in used vehicle sales selling on average 23 more units over the same time frame.
As with new vehicles, competition as well as consumer price shopping has caused a decrease in gross profit. Only 27% of dealer clients showed an increase in margins on used vehicle sales. Average margins fell .6% from 10.49% in 2012 to 9.89% in 2013. On average, gross profit per vehicle (excluding F&I) declined by $91 per vehicle. In 2012, dealer clients averaged (excluding F&I) $1,882 per vehicle, while only generating $1,791 in 2013. For 2014, we expect the margins to stabilize.
Parts & Service
A substantial number of dealers saw their parts and service rise. Over 85% of dealer clients saw their service business increase an average of $110,000. Parts sales increased even more dramatically. Over 87% of dealer clients increased parts sales an average $147,000. While dealers would like this growth to continue, it is anticipated that these numbers will level off in 2014.
Margins in both categories remained stable. While approximately 54% of dealer clients saw an increase in service margin, the average increase was only .16%. The average margin for dealer clients is approximately 64%. The same can be said for parts sales. Approximately 63% saw their margins increase, but that increase on average was less than .4%. The average margin for dealer clients is approximately 32%. With both average margins within industry ranges, any change would be minimal in 2014.
Overall Profitability
Fueled by additional unit, parts and service sales, it’s no surprise that a majority of dealers showed greater profits. Approximately 68% of our dealer clients achieved an increase in profitability from 2012 to 2013. The solid results in 2013 is a harbinger of things to come for 2014, as the general outlook is for steady, if unspectacular, growth in the near future.
If you have dealership management questions or concerns, please contact Paul McGovern at PMcGovern@DowneyCoCPA.com.
