That’s the conclusion of the professional services provider, ASE’s latest report for May.
‘The financial results for the first five months of 2012 look, on the face of it, to be quite healthy,’ said the report. ‘Profit for the average dealer is up, both in percentage and real terms. This differs from the impression you get from chatting to dealers who, whilst seeing a bounce back in May from a poor April, are finding the current economic climate challenging, to put it mildly.’
The performance improvement is the result of dealers’ vehicle sales departments, however the service department results are ‘holding up better than expected’.
The average dealer made an extra £18k vehicle sales net profit to May compared with 2011. This improvement has been driven by increased new vehicle sales, albeit at very narrow margins, and a growth in used vehicle return on investment.
Used vehicles are proving ‘a massive focus area for 2012’ and this is starting to have a ‘significant positive’ impact. The company says they have seen a growth in gross profit per unit to over £1k on average which has driven the ROI improvement.
Stock increase – concerning
‘The increase in stock holding, shown by used vehicle stockturn, is concerning particularly with a slight weakening in the used car market since May,’ said ASE.
‘When we see the June results we will also be able to assess the extent to which the used vehicle stocks are tainted by a drive for new vehicle volume targets, with self registration activity taking place within most brands. This could have a significant negative impact in profitability for the remainder of the year.
‘It is pleasing to see a drop in the expenses as a percentage of gross profit ratio across all departments. This needs to remain a key focus as we enter the second half of 2012,’ concluded the report.