No margin for error
Even with the industry on a roll, dealers must keep working to control costs and protect their profitability.
That's the lesson from the National Automobile Dealers Association's annual summing up of dealership activities. As U.S. new-vehicle sales rose 7.5 percent last year, total dealership pretax margins remained flat at 2.2 percent.
And that's only because dealerships expanded used-vehicle and service and parts operations in what Steven Szakaly, NADA's chief economist, describes as "a hypercompetitive market where margins are razor-thin."
That's especially true on new-vehicle sales, which provide the bulk of revenue but add little to the bottom line. Net new-vehicle profits for the average dealership fell to $69 per unit sold in 2013 from $111 the year before.
One NADA statistic suggests dealers still remember their lessons from the recession. Last year, total dealership employment nationwide rose 3.4 percent, well below the 8.8 percent increase in total revenue at the average dealership.
Even in good times, dealers must eliminate waste and watch the bottom line.