The ‘good old days’ for U.S. car dealers? OK, now what?

05-26 GreenLight - The Good Old Days - Part 2_www.soshable.comSecond of two parts

If these are the “good old days” for auto dealers as suggested in last week’s blog post on GreenLight, then those dealers most certainly will be looking for insights into the trends affecting their businesses and ways to take advantage.

But exactly what signs and trends are cited in “The Blue Sky Report” newsletter from Haig Partners dealer consulting firm of Ft. Lauderdale, FLA?

Here’s what dealers need to look for, according to Alan Haig and Nate Klebacha in the report:

Strong profits continuing for public and private dealers. Private dealerships generated an average of $923,248 in pre-tax profit in 2013, according to NADA, a record-high level. Combined pre-tax income for all public U.S. auto retailers was $1.6 billion in 2013, up 13 percent from 2012.

Increasing new vehicle sales per franchise. Thanks to a lower dealer count and rising sales, new vehicle sales per location reached an all-time high in 2013, at 877 per dealership.

Sales growth vs. declining new-vehicle margins. Auto sales appear likely to continue to grow over the next few years, but new vehicle margins have been declining, down 2.6 percent in 2013, due to a number of factors such as the Internet … For the moment this remains a worrying trend for dealers.

Used cars are increasingly important. More dealers are focused on their used vehicle business because of the sometimes stronger profits for used cars, and the reconditioning that also boosts fixed operations. And F&I on used cars can be higher than with new car sales.

Fixed operations are growing nicely. Per NADA data, fixed operations at U.S. dealerships fell 11 percent during the recession but increased the last two years to return to pre-recession levels. … Most retailers believe this growth will continue in the next few years.

Finance and insurance advantages. The average dealership continues to increase its profits from the F&I department. Dealers are offering additional products and doing a better job of selling existing products.

The good old days? Could be – for those dealerships that seize the moment and ride the trends.

See last week’s blog post for more on the megatrends related to these dealer-level trends.

For more details also see “The Blue Sky Report” online.

– Mark Macesich

 

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