NADA sees record profits for dealers

U.S. dealers have cashed in on the supply chain tribulations that rocked the auto industry in 2021. Profits for the average dealership are set to smash the 2020 record, fueled by tight inventories and high per-vehicle margins.

According to the National Automobile Dealers Association, the average U.S. dealership recorded a net pretax profit of about $3.4 million through October — more than double the $1.6 million reported for the first 10 months of 2020. And it surpassed the $2.1 million in net pretax profit recorded for the average dealership for all of 2020, which itself was a record annual profit.

The average dealership's operating profit more than quadrupled in the January-to-October period to $2 million. Net pretax profit includes operating profit and the automaker incentive money paid to dealerships for complying with certain performance targets.

According to J.D. Power data, U.S. dealerships are on pace to make about $5,200 in profit per new vehicle in December, more than triple what they made per new vehicle for the same period in 2019.

The good times — for dealers — should continue into the new year: 2022 is likely to be the most profitable year dealerships have ever recorded, as inventories remain at near-record-low levels, said Tyson Jominy, J.D. Power's vice president of data and analytics.

While production is expected to rebound this year, the additional volume should be quickly absorbed by retail and fleet customers starved of vehicles last year. "With 4 million to 5 million units of pent-up demand, vehicles are barely going to touch the dealer lot before they are delivered," Jominy said.

The latest NADA figures show an increase in volume and per-vehicle gross profits for new and used cars and trucks.

The number of new vehicles retailed at the average dealership through October of last year rose 9.4 percent compared with the same months in 2020, a period in which sales tumbled significantly in the spring during the first months of the coronavirus pandemic.

The number of used vehicles retailed at the average dealership through October rose 6.3 percent, according to the NADA report. The average per-vehicle gross profit climbed 67 percent for new vehicles and 36 percent for used.

While pandemic-related disruptions to assembly lines are likely to dissipate this year, the industry isn't out of the woods.

"The general supply chain fragility remains," Jominy said. "The shortages — whether chips, tires or paint — are extensive."