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Dealer profitability on the rise in 2013

The average UK car dealer made a profit of £6,600 in the traditionally loss making month of April to continue the rise in rolling 12 month profitability.

According to the latest dealer profitability figures from ASE, the net profit percentage for the average dealer has therefore set a new record at the end of April, with profitability being £7,400 ahead of the 2012 result for the month.

Mike Jones, ASE chairman, said: “The principal area of performance differential remains the vehicle sales department with the key relationship between gross profit and expenses continuing to improve.

“We have seen a further slight deterioration in the used to new volume ratio showing that the profit improvement is driven by the strong new car result.”

Jones said used car profitability has remained strong during April however the very low volume of sales, which also shows up in the lengthening stock turn, has meant that return on investment has dipped to the lowest level since August 2012.

While still ahead of the rolling 12 month figure for the prior year, the decline in this ratio is increasing the average dealer’s reliance on the strong new car market. Jones said he hopes the strength of the new car market continues.

He said: “For the first time in 18 months we have seen a significant improvement in the overhead absorption ratio which now sits marginally ahead of the rolling 12 month result for the prior year.

“We will monitor this closely as we move through Q2 to confirm that it is not merely a reflection of the timing of bank holidays, however it may be that we are starting to see the impact of vehicle parc increases and improved sales techniques on reversing the decline in labour sales, which would be great news for dealers.”
Dealer profitability on the rise in 2013

The average UK car dealer made a profit of £6,600 in the traditionally loss making month of April to continue the rise in rolling 12 month profitability.

According to the latest dealer profitability figures from ASE, the net profit percentage for the average dealer has therefore set a new record at the end of April, with profitability being £7,400 ahead of the 2012 result for the month.

Mike Jones, ASE chairman, said: “The principal area of performance differential remains the vehicle sales department with the key relationship between gross profit and expenses continuing to improve.

“We have seen a further slight deterioration in the used to new volume ratio showing that the profit improvement is driven by the strong new car result.”

Jones said used car profitability has remained strong during April however the very low volume of sales, which also shows up in the lengthening stock turn, has meant that return on investment has dipped to the lowest level since August 2012.

While still ahead of the rolling 12 month figure for the prior year, the decline in this ratio is increasing the average dealer’s reliance on the strong new car market. Jones said he hopes the strength of the new car market continues.

He said: “For the first time in 18 months we have seen a significant improvement in the overhead absorption ratio which now sits marginally ahead of the rolling 12 month result for the prior year.

“We will monitor this closely as we move through Q2 to confirm that it is not merely a reflection of the timing of bank holidays, however it may be that we are starting to see the impact of vehicle parc increases and improved sales techniques on reversing the decline in labour sales, which would be great news for dealers.”
 

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