Last year’s auto dealership profits were the best ever and this year is on the road to topping last year.
According to a study by the National Automobile Dealers Association pretax profit at the average U.S. dealership rose 6 percent. Average dealership’s new-vehicle departments reported having the highest net profits since 2004. The used-vehicle departments also saw greater per-vehicle revenue.
David Westcott, the owner and chairman of NADA, believes this year looks promising despite two uncertainties, the Affordable Care Act and the possible future regulation of lenders, which could impact the finance and insurance offices of dealerships. With the news of the delayed implementation of changes to the health care rules these issues won’t come to light for another year.
Industry wide dealership profits as a percentage of revenues fell 0.1 percent last year but still managed to remain above 2010’s, which had been the highest in 24 years. Net profit per new vehicle rose from $23 to $111, which is a major improvement from 2010. New-vehicle sales volume also rose last year gaining 13 percent.
One concern though, is that year-over-year parts and service revenue will remain flat as it is generally a reflection of vehicles sold in the prior two to three years. With the rising quality of vehicles produced customers aren’t generally coming in with warranty concerns anymore.
Despite a few minor setbacks that could arise, the future is looking very promising for the automotive industry as sales and profit continue to rise.