Monday, December 6th, 2021

Why average dealership profits are setting new records

With vehicle prices rising amid inventory shortages, profits for the average U.S. auto dealership nine months into 2021 are on pace to soar past the annual record set last year.

According to the National Automobile Dealers Association, the average U.S. dealership recorded net pretax profit of $3 million through September. That was more than double the $1.3 million in net pretax profit reported for the first nine months of 2020. And it’s already well above the $2.1 million in net pretax profit recorded for the average dealership for all of 2020, which itself was an all-time record annual profit.

The average dealership’s operating profit more than quintupled through the first nine months of the year to $1.8 million. Net pretax profit includes operating profit and the automaker incentive money paid out to dealerships for complying with certain performance targets.

Last year’s record profitability was driven by unique market conditions that made both new and used vehicles scarce, NADA Chief Economist Patrick Manzi told Automotive News this year. Manzi and NADA spokespersons did not respond to requests for comments on the latest numbers.

NADA has tracked dealership financial data in its current form since 2009. Manzi noted in a February interview that there could have been years in decades past when net pretax profit would have exceeded 2020’s $2.1 million when adjusted for inflation.

Manzi said in February that he expected the high profit levels to cool this year and go back to “more of a return to normal,” but so far that hasn’t happened. New vehicles have remained relatively scarce this year. And the latest figures from NADA show an increase in both volume and per-vehicle gross profits for new and used cars and trucks.

According to the NADA report, the average number of new vehicles retailed through September of this year rose 16 percent compared with the first nine months of 2020, a period in which sales tumbled significantly in the spring during the first months of the coronavirus pandemic. The average number of used vehicles retailed through the first nine months of 2021 increased 9.4 percent. The average per-vehicle gross profit jumped 65 percent for new vehicles, and it climbed 36 percent for used.

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