10:44 am, January 17, 2014
DEALER profitability has continued to drop from recent record levels, according ASE.
The latest research from the company has revealed that the average car dealer recorded a loss of £4,000 in November 2013.
This figure was slightly larger than the loss reported in the same month in 2012, producing the drop in the rolling 12-month return from 1.41 per cent, which it reached during September and October last year.
Therefore, ASE says overall profitability for 2013 should finish strongly with registration levels indicating that dealers are likely to record significant registration bonuses for the final quarter and year-end result.
Mike Jones, ASE chairman, said: ‘The slight profitability dip in the past few months means that we now seem unlikely to hit a return on sales of 1.5 per cent. However, top performers across nearly all brands will make more than five per cent.
‘At the end of October, we highlighted a potential issue within used car stock believed to be a result of self registration exercises undertaken at the end of quarter three. Dealers have made significant inroads into cleansing their stock in November with average stand-in-values dropped by more than £1,000.’
This drop in the month implies that either pre-registration vehicles did not make up a large proportion of stock or dealers have not been holding the cars for 90 days. This stock disposal has not had too much of an impact on profitability, as dealers still make a gross profit of more than £1,000 per unit during November.
As a result, used car return on investment has remained below 80 per cent with gross profit margins falling to 11 per cent in the past two months.
Jones added: ‘While the overall return on sales level has dropped slightly, dealership profitability remains robust and, with an increasing number of vehicles passing through the same number of dealerships, we should see a slow recovery in overhead absorption in 2014.’
