12:28 am, June 10, 2011
THE average car dealer ‘only’ reported a £6k loss for April, ASE’s latest profitability statistics reveal.
While a £6k loss sounds expensive, the firm says that the month was ‘always going to be a tough month to make profit in’ due to three bank holidays.
April was a ‘perfect excuse for both customers and staff to take an extended holiday and dealers recovering from pulling forward as many deals as possible (and creating a few extra) in order to meet the Q1 sales targets in a quiet retail market. And then the sun shone.’
Given this backdrop the results for the month are very creditable, says ASE.
‘Looking at the performance year-on-year you can see that we have now fallen significantly behind 2010. Interestingly the turnover levels have dropped only slightly on the prior year, however there has been a real erosion of margin with the average site sitting £22k behind at the end of April.’
However, it is overhead absorption and used vehicle return on investment which has seen the largest deterioration.
Declining income from service and parts has been matched with a slight increase in average overheads to produce a significantly worse result. Average overhead absorption dropped six per cent during the month of April, although ASE said they would expect some of this to be clawed back during May.
‘The used : new ratio confirms the increasing importance of used vehicle sales in 2011 and dealers need to work to drive the return on investment towards our benchmark of 100 per cent,’ says ASE. ‘The April result is a slight improvement on March 2011 as the dealers have cleansed some of their unwanted part exchanges.
‘Whilst the remainder of 2011 looks challenging an average return of one per cent is still attainable which remains ahead of the longer term average of 0.7 per cent.’
