Through June, dealers' pretax net profit margins held steady with 2018 levels, at 2.3 percent, according to the report. That's the first time since 2015, when margins were 2.8 percent, that average dealership net profit as a percentage of sales hadn't declined. Through August, they had ticked up to 2.4 percent, according to NADA's monthly dealership financial profiles.
Net profit includes automaker incentives, such as controversial stair-step volume-based sales targets, that are excluded from operating results.
"I'm happy to see that it has sort of plateaued there," Manzi said of average net profit margins. He said the data signals there may not be much more room to fall, barring a major economic disruption. He also said he doesn't see signs of an imminent recession.
"A flatlining ... indicates that, even with all the added pressure of relying on these manufacturer incentive programs, dealers are still able to maintain a profitable business," he said.
Through June, dealers' average pretax net profit was $714,480, just 1.5 percent higher compared with the same period a year ago, according to NADA's monthly profiles. The picture was rosier through August, the most recent monthly data available, with pretax net profit rising to $991,455, or 2.5 percent above the year-earlier period.
Along the way, the U.S. auto sales picture has brightened. Sales were down 2.5 percent at midyear and 1.6 percent after three quarters.
"We can't speak for the industry, but all our net profit has traditionally been, as a percentage, higher than the NADA average," said Pete DeLong- champs, senior vice president of manufacturer relations, financial services and public affairs for Group 1 Automotive Inc., the fourth-largest dealership group in the U.S.
"With the compression of margins, it makes things more difficult, which is why you're seeing the retailers focusing more on used and parts and service, focusing on the things that we can control," DeLongchamps said in an interview. "We can't control what happens with the margins based on what happens with incentives and inventory levels, but we know that we can provide great customer care and grow that business."
Jeff Dyke, president of Sonic Automotive Inc., said that the simpler the brands make the incentives, the easier it is for consumers and dealers. And some of the bonus programs are becoming less complex, he said, although he noted that doesn't mean targets are getting any easier to reach.
NADA's midyear report doesn't address dealers' operating profit outlook, but the group's monthly financial profiles for 2019 have indicated that dealers are seeing some improvement this year.
Through June, dealers on average reported an operating profit of $53,526, 12 percent below the level in the same period last year. Through August, however, dealers reported making $96,038 on average on operations, 21 percent ahead of the same period in 2018.
Still, operating profit didn't turn negative until December 2018, NADA said. Franchised dealers on average lost $13,338 on their operations last year after earning $91,774 in 2017, according to NADA data.