Dealer profits are looking healthy in the first five months of 2012, but the view from motor retailers is to remain cautious while battling the current economic climate.

According to the latest figures from ASE, the average dealer made an extra £18,000 vehicle sales net profit to May compared with 2011.

The improvement has been driven by increased new vehicle sales, albeit at very narrow margins, and a growth in used vehicle return on investment. ASE said service departments are holding up better than expected given declining vehicle parcs for most brands which is impacting retail hours. However, overhead absorption is still on a downward trend with the average sitting at 61.1% in comparison to a benchmark of 80%.

Used vehicles are proving a massive focus area for 2012 and this is starting to have a significant positive impact.

Mike Jones, ASE chairman said: “We have seen a growth in gross profit per unit to over £1,000 on average which has driven the ROI improvement.

“The increase in stock holding, shown by used vehicle stockturn, is concerning particularly with a slight weakening in the used car market since May.

“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 ratios across all departments. This needs to remain a key focus as we enter the second half of 2012.”