US: auto dealers see 6.7 percent increase in profits last year image

The auto dealers working in the US, the second largest auto market in the world, had a rising average profit, up 6.7 percent in 2014, totaling almost $1.1 million.

While the figure soared positively, the actual earnings – meaning the average profit margins – remained relatively low at around 2.2 percent, the same figure seen the year before and in 2012. The figures have been reported through the annual study made by the National Automobile Dealers Association. According to the report, a signal to the highly competitive state of the US auto market, the profit margin is increasingly achieved by the dealers through their used car, service and parts business operations – all of them soaring in profitability above the new car sales department. “Total dealership gross margins fell for a fifth year in a row to 13.1% of total dealership sales from 13.4% in 2013,” commented NADA chief economist Steve Szakaly. Thanks to productivity surges and increased deliveries, the costs as a percentage of sales were lowered from 11.2% in 2013 to 10.9% last year even as total expenses rose 4.7 percent, the official added.

Thanks to the record number of recalls, particularly driven by the massive safety campaigns tally stemming from the General Motors and Takata debacles, sales from parts and service grew 8.4 percent to a total of $91.7 billion, with the average national dealer reaching $5.6 million on service and parts – up from $4.8 million the year before. While sales of new cars have risen continuously during the past five years, buyers are still keeping their older cars for longer – while in 2012 there were 14.2 million older cars scrapped to buy new vehicles, the ratio dropped last year to just 11 million.