U.S. car dealerships’ rampant employee turnover is worsening, an industry study released today found.
In fact, the three-year employee retention rate at dealerships reached a new low last year, dropping two percentage points from 2014 to 45 percent, vs. a 67 percent rate in the overall U.S. nonfarm private sector, according to the National Automobile Dealers Association’s 2016 Dealership Workforce Study.
Only one-third of all sales consultants reached the three-year tenure milestone.
NADA’s study tracks key data for 2015 on compensation, benefits, retention and demographics at nearly 2,000 U.S. new-vehicle dealerships, in many cases broken down by job category.
Many of its findings reflect what industry experts have said anecdotally, particularly the finding of “unacceptably high” rate of employee turnover.
“It’s still a huge problem to find and retain salespeople,” Jim Appleton, president of the New Jersey Coalition of Automotive Retailers, told Automotive News.
The median tenure for car dealership employees has steadily declined since 2011 when NADA started its annual work force study.
Then, it was about 3.8 years. Last year, it was 2.4 years. In comparison, the median work force tenure in the nonfarm private sector has held steady at 4.1 years since 2011, the study said.
The study called that decline an “alarming trend,” saying it represents a drain on the industry of talent and cumulative work experience. The result, the study said, is “reduced productivity, reduced median and average earnings, and reduced dealership profitability.”
Indeed, productivity, measured as monthly gross profit per employee, rose just 0.4 percent to $8,446 per employee in 2015. That compares with a 3 percent rise in 2014.
While dealershipwide tenure and three-year retention rates declined, the turnover rate for sales consultants declined by five percentage points to 67 percent in 2015.
Turnover for other positions the study looked at -- general manager, sales manager, finance and insurance manager, service manager, service adviser, service technician, parts manager and parts consultant -- all stood below the 40 percent average for the U.S. nonfarm private sector.
All of the sales consultant turnover improvement came from nonluxury dealerships. There, turnover dropped seven points to 72 percent. Luxury-brand sales consultant turnover was unchanged at 48 percent.
The reduced turnover among sales consultants “may be the result of the fact that there are not as many rehires rather than that we’re getting better at retaining,” said Appleton.
More sales go through dealerships’ business development centers, Appleton said. Therefore, dealers “find they’re using fewer sales consultants than in the past per sale. Still, can we really be pleased going from the 80 percentile to the 70s in turnover? That’s just a horrendous situation,” he said.
The turnover came as dealerships raised their pay rates, but at a slower pace than other employers.
Last year’s average weekly earnings across all dealership job titles increased 1.4 percent, or about $19, to $1,341. The increase trailed the 2.2 percent earnings growth in the U.S. nonfarm private sector.
But average weekly earnings for incumbent employees grew at an annual rate of 6.3 percent. Incumbent F&I managers saw the highest weekly earnings growth at 10.9 percent.
The average annual compensation for a sales manager was virtually unchanged at $127,693. Average pay for F&I managers stood 4 percent above sales managers’ average pay, at $132,786.
The average compensation for a sales consultant was $67,846 last year, unchanged from 2014.
Although luxury dealerships still pay more than nonluxury stores, employees at nonluxury dealerships saw greater income growth in 2015 than their luxury peers.
On average, luxury brand dealerships paid their employees in all positions about 14 percent more than nonluxury stores. That gap was 19 percent in 2014, the study said.