ALTHOUGH last year was a record one for UK vehicle registrations, it failed to live up to 2015 in terms of dealer profitability.
The average dealer finished the year with a profit of £178,000 per site, down nearly £20,000 on the figure at the end of the previous 12 months, according to profitability specialists ASE.
Retailers did, however, outperform 2015 in December, reflecting the increasing reliance on bonuses for hitting overall targets.
ASE chairman Mike Jones said: ‘The decline in profitability was principally down to a fall in vehicle sales and department profits, as a result of increased targets squeezing margins and hitting average profit per unit.
‘There was good news in aftersales, with increased service contribution, but this was not sufficient to maintain overhead absorption levels in the face of increased operating expenses from ever-larger facilities.
‘2016 saw the continued evolution of the retailing model in the UK, with new vehicle sales falling 10 per cent, being replaced by increased used vehicle sales.
‘Dealers increasingly self-registered units to hit targets and retailed these cars as used vehicles.’
Jones said that while there is a danger of the system becoming clogged, negatively impacting residual values, the process was well managed throughout the year as reflected by the strong used car return on investment results.
He added: ‘Further focus needs to be placed on this in 2017, with a reduction in the days in stock being desirable.’
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