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The average UK dealer recorded a trading loss in 2008, the first annual loss in a decade, according to the latest national motor trade profitability figures.
Profitability fell last year as dealers grappled with the slump in new car sales and decline in used car values.
The average dealer dipping into breakeven for the 11 months to November, according to national composite figures from Trevor Jones/ASE, the specialist dealer business management firm, published exclusively in Motor Trader newspaper.
Net profit, as a percentage of sales, for the year to the end of November dipped by 0.03 per cent equating to an average loss of £4,000 per site, compared with a profit of £75,000 for the same period in 2007; a £79,000 shortfall in dealer profitability. Many sites posted breakeven figures for the period.
With December’s new car market falling by 21 per cent Trevor Jones/ASE partner Mike Jones warned that year-end figures would put dealers in the red.
“With December and full year sales down it is likely to have been a poor month for quarterly and year-end manufacturer bonuses.
November’s results were also hindered by the fall in used car prices; dealers who had not traded out of their used stock at the end of November will then report further losses in December,” he said.
“There will be an average year-end loss which is disappointing as dealers and manufacturers worked hard last year, invested heavily in facilities and didn’t see a return,” he said.
Jones is urging retailers to address cash flow management over the coming months as the market tightens.
“Cash management is crucial this year – this will save a number of dealers from going to the wall. It’s not loss of profit that makes businesses fail, it’s running out of cash,” he said.
During the same period the top performing dealers beat Trevor Jones/ASE’s industry benchmark of a 3 per cent return on sales by a full percentage point achieving profits in the region of £288,000.
Jones said the coming months will be tough for those achieving the industry average and predicted this recession will bite deeper than previous ones.