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Average car dealer turnover up 4.5% in 2015 - but profits fall

Finance: profit risk and loss

Franchised dealers worked harder for smaller returns in 2015.

They made an average profit of £14,600 in December latest figures reveal. According to its figures, ASE says this is down from £26,600 on the same month in 2014 – or a drop of 45%.

“Looking back, 2015 will be remembered as a year of a phenomenal amount of activity as a result of the supply push of new vehicles alongside a decline in profitability from the record levels achieved in 2015,” said Mike Jones, ASE chairman.

“This is partly a reflection of a change in the bonus arrangements for some franchises and partly reflecting some franchises recognising annual bonuses through the year to bolster profitability.

“It is certainly the case that dealers earned less for doing more, with average turnover up 4.5% on the year, but annual profits falling from £225,000 to £197,000.

“The decline in December pushed us back below the psychologically important £200,000 per site barrier.”

The principal reason behind the drop in profitability was the increase in the vehicle sales expenses as a percentage of gross profit ratio.

“We have seen a decline in gross profits as a result of planned aggressive selling to hit target, lower used vehicle gross profits from nearly new vehicles and lower bonuses coincide with a rise in expenses to service the increased volume.

“We have also seen a continuation in the fall in overhead absorption – a trend which I cannot see reversing given current brand pressures on facilities.”

Overall new vehicle sales levels matched those from 2014, with the increased level of registrations coming from self-registered cars.

These vehicles helped push up used vehicle sales, which rose 6.7%.

“Early indicactions are that we are going to continue the same theme in 2016.

“Registrations are up again, despite the volume of pre-registered vehicles dealers came into 2016 with.”

ASE dealer composite stats December 2015

 



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Comments

  • Karl Davis - 05/02/2016 14:47

    Yet again classic “Accountant” mentality from ASE.… “We have seen a continuation in the fall in overhead absorption – a trend I cannot see reversing given current brand pressures on facilities” Basic economics lesson boys - there’s actually three ways to make more money in business….. “Sell more (volume), for more (margin), spend less (costs). Karl Davis, Coachworks Consulting, MD

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  • gareth mconomy - 09/02/2016 13:03

    Karls comments are spot on!

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  • John Dickson - 10/02/2016 09:40

    Absolutely - Karl is bang on - we are all in charge of our own destiny.

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