Dealer profits tumble in August

Car dealers lost an average of £13,000 during August while the best performers “scraped into profitability”, according to the latest profitability analysis from ASE.

 The data shows average performance levels dipped for the first time this year in August to 2009 levels.

 “Dependent on the final outcome of September, we expect the poor relative performance of the second half of 2010 to continue and dealers to struggle to hang onto the significant profits made during the first half, although we have heard recent positive noises about the current order bank,” said ASE chairman Mike Jones.

 Net profit for the year to date averaged 1.1 per cent, which is the same as last year.

Year on year sales per salesperson averaged 171 for the month, up on last year’s 160. Return on used car investment improved from 88.4 per cent to 110.6 per cent. While overhead absorption was also up from 65.1 per cent to 69.7 per cent.

“The 2010 results have been built on a healthier vehicle sales than the prior year as evidenced through the differing overhead absorption results. Given that the flow of new vehicle sales has dried up, with an expectation that we will fail to match 2009 performance in any of the remaining months of the year, dealers will have to rely on aftersales to support the business,” said Jones.

However, he warned that used stock levels were higher than last year and this could hamper performance.

“The average dealer is holding nearly 25 per cent more used stock than they did at the end of August 2009. Making profit from these additional vehicles, or not holding them through a series of book-drops, will be a necessity if the lost new vehicle profit is to be replaced. The banks always focus on working capital management through the winter and this will be key during the last quarter of 2010.”