11:36 pm, August 10, 2011
THE average motor dealer made a profit of £19k in June ASE’s latest profitability results reveal.
However, the company does state that while this profit looks unfavourable compared to June 2010 and June 2009, the month’s outcome is good.
‘It is a positive performance which maintained the current year-to-date return on sales above one per cent,’ said ASE’s June report. ‘With current trading challenges there appears, however, little hope of performance staying above one per cent as we move through quarter three.
‘In order to exceed one per cent, dealers would need to improve performance in both aftersales and used cars. Unfortunately the signs for this do not look good. The overhead absorption figure has remained depressed compared to 2010 with dealers struggling to fill the workshops, particularly in an environment of declining internal and warranty hours.
‘While the top performers are still exceeding 100 per cent absorption the average dealer is struggling to keep a lid on rising costs and generate income within the service department.
‘This is understandable in the current environment where customers are deferring services and not having work done, however we see a real disparity on retention rates and the closing ratios on additional upsell based on the dealership sales processes.
‘There also appears to be a potential issue brewing within used vehicles. While dealers have – quite rightly – switched on to used cars in 2011 as evidenced by the increase in the used to new ratio, there is a problem building in used car stock. While the used vehicle stockturn is at a similar level to 2010 the average stand-in-value of these vehicles has increased by 10 per cent.
‘This shows an increasing prevalence of nearly new vehicles (and self registrations) in a market where the valuation guides have been dropping significantly on a monthly basis. There are a lot of ‘nearly new’ vehicles on the vehicle disposal websites and these cars are starting to significantly age.
‘Heavy depreciation on these vehicles will significantly impact results in the remainder of 2011 with all dealers working to achieve a 45 day stockturn and an older/cheaper mix of cars to reduce their risk,’ the report concluded.
