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Car dealer profits up, but warning signs in used cars - ASE

The average UK motor dealer made a profit of just over £9,000 in October.

This represents a slight improvement over the comparative month in 2012 producing a further small growth in the average return on sales.

ASE's monthly performance stats show profitability has nearly reached £190,000 for the average site on a rolling 12 month basis; the highest level since we began reporting the statistics.

Profitability from the vehicle sales department has stabilised with dealers no longer making the significant gains they were in prior months.

The vehicle sales expenses as a percentage of gross ratio, the drop in which has driven the improved profitability, remained at 62.7%.

ASE chairman Mike Jones said: "We will be watching the movement in this ratio carefully to ensure that dealers continue to profit from the increased turnover in the vehicle sales departments."

Used vehicle performance dipped slightly in October with the rolling 12 month return on investment in used cars falling under 80% for the first time since March.

"There has been little movement in this ratio throughout 2013 as it has sat within touching distance of 80% for the average dealer.

There are, however, a number of concerning used car trends which we will be monitoring."

The average stand in value of used cars has spiked significantly and is currently just under £10,000.

This represents a 16% increase over October 2012.

"At the same time we have also seen a drop in the average profit margin to 11.1% in October.

"Profitable disposal of the nearly new vehicles which have produced this spike will be vital to dealers’ long term profitability, with a real risk that this stock will produce a steady decline in used car return on investment.

"There has been little change in aftersales performance, with a rosier outlook for those dealers with strong retention strategies.

"The increase in the vehicle parc should help performance in 2014 with a reduction in idle time improving overhead absorption."

ASE's performance stats

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