With profits and unit sales both up, 1998 was a good year to be a franchised new-vehicle dealer.
Average pretax income at franchised new-vehicle dealerships rose to $403,115, up 31.3 percent from 1997, the National Automobile Dealers Association said. Profits were boosted by lower floorplan expenses, which fell 15 percent because of lower interest rates and faster inventory turn, NADA said.
The profit numbers were released last week in the association's 1999 NADA Data report, a yearly statistical look at new-car retailing in the United States.
NADA also rates dealer optimism, which peaked in April 1998, drifted downward later in 1998 and started back up this year. This cautious optimism reflects dealers' thoughts of the future, said NADA spokesman Mike Morrissey.
'It is indicative of dealers feeling, `The ride can't last forever,'' Morrissey said. 'Either interest rates will go up or the economy will slow down.'
The average 1998 selling price of a new vehicle rose to $23,600, up 4.2 percent from 1997. Franchised dealers sold 15.5 million new vehicles in 1998, up 3 percent from 1997.
Payroll was the biggest single expense, with dealerships spending an average of $1.8 million. The second-biggest expense was advertising, on which dealerships spent an average of $235,000.
The breakdown of dealership ad spending shows outlays for newspapers, TV and the Internet rose in the past 10 years, while radio spending fell.