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Average dealer profitability continues to strengthen

The average UK dealer made a profit of £7,300 in May according to the latest profitability figures from ASE and the company is predicting strong probability in Q3 this year.

According to the latest ASE dealer profitability figures net profit as a percentage of sales dipped slightly in May from 1.29% at the end of April to 1.27%, however this was a result of an unusually high level of turnover in the month reflecting the strong retail new vehicle sales levels dealers are currently achieving.

High turnover levels in the non-quarter-end months is a key indicator that registration levels are not merely being artificially supported through massive self-registrations, but is being balanced by genuine retail demand.

Mike Jones, ASE chairman, said: “In May we have seen a further drop in the vehicle sales department ratio between expenses and gross profits.

“This ratio has been on a steady decline for the last 12 months and is directly producing the strong dealer profitability we are currently enjoying.

“There were signs in May that dealers were starting to improve their used vehicle stock profiles as stockturn dipped back below 60 days and we saw a small increase in used car return on investment.

“As we have seen in the last few months the decline in overhead absorption has stabilised, albeit with increasing overheads offsetting the gains being made through increasing vehicle parcs and strong levels of internal service sales.”

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