This article is the final installment of our annual series analyzing the year to date results of our dealer clients, September 30, 2019 compared to September 30, 2018.
Fixed operations (parts, service, and body shop sales) continue to be a strong profit center for dealerships. Dealers depend on the profits from these departments to absorb a significant portion of a dealership’s overhead expenses. According to industry analysis, the fixed absorption rate for dealers in the first quarter of 2019 was 57%.Our dealer clients averaged approximately 55%, an increase of nearly 3.25% over the prior year.
The following are selected results from our analysis:
| Service | Parts | Body Shop | |
| Average Overall Increase in Sales | 12.55% | 7.55% | 1.34% |
| Average GrossProfit Percentage | 65.70% | 33.43% | 49.52% |
As detailed above, our dealer clients have experienced solid growth in service and parts. Body shop sales have remained relatively flat after several years of steady growth. Service gross margins have increased approximately .75% while parts gross margins have remained flat for our dealer clients.
Dealership fixed operations continue to reap the benefits from the recent historical highs in new vehicle sales. As vehicles become more technologically advanced, dealers are far better equipped to handle vehicle issues than independent repair shops. They have invested in the tools and training necessary to properly repair these vehicles. This is especially true with electric vehicles. Parts sales increases are the byproduct of stronger service sales.
As detailed in the earlier installments of our survey summaries, vehicle gross margins continue to erode. Fixed Operation sales remain the key to a dealer’s profitability. Efficiently run service, parts, and body shop departments can generate substantial gross profit dollars for the dealership which is necessary to absorb the dealership’s operational expenses and generate profits. Successful dealers will be those who can effectively grow, market and manage their back-end operations.
If you have any questions regarding this article, please contact Charlie Paolino at CPaolino@DowneyCoCPA.com or at 800-849-6022.
