Dealership expenses rose last year, but dealers managed to keep their net profit margins steady.
Total expenses, including sharply bigger payrolls, rose 4.7 percent at the average dealership in 2014, according to NADA Data, the annual report on U.S. new light-vehicle franchised dealership sales and financial trends. It was released today by the National Automobile Dealers Association.
But at the same time, increased new- and used-vehicle sales per dealership, or throughput, as well as additional service business helped stabilize net pretax profit margins -- net pretax profits as a percent of sales -- at 2.2 percent.
It was the third straight year that those margins held steady at 2.2 percent.
NADA Chief Economist Steven Szakaly said dealership margins did not climb in part because of fierce industry competition. But keeping net profit margins stable is a testament to the efficiency of the retail auto industry, he added.
“Any low-margin business is going to watch their costs per unit very, very carefully and that is exactly what happened,” he said.
The average dealership’s total revenues rose 7.1 percent in 2014 to $49.2 million, climbing in part due to higher vehicle transaction prices. The average total gross -- revenues minus cost of goods sold -- rose 5 percent to $6.5 million.
U.S. new light-vehicle sales grew 5.9 percent in 2014 while the overall number of new-car dealerships rose less than 1 percent, according to dealership census data for 2014 compiled by Automotive News.
NADA Data showed that the average dealership employed 64 people in 2014, up from 57 in 2013, and had an annual payroll of $3.5 million, up from $3 million. Total payroll for all dealerships was $58.1 billion last year, up 8.2 percent.
At the average dealership, new-vehicle department sales rose 8.1 percent to $28.3 million and used-vehicle department sales were up 6 percent to $15.2 million. Service and parts department sales grew 5.2 percent to $5.6 million, helped by warranty work created by the increased number of recalls last year.
Per-vehicle ad costs drop
Net profits rose in the average dealership’s service and parts department last year, but fell in the new- and used-vehicle departments, NADA Data charts showed.
The average dealership spent $494,776 on advertising in 2014, up 15 percent from 2013. But increased vehicle sales per dealership caused advertising expenses per-vehicle to dip to $608 from $616.