Even though U.S. is not in a recession that’s exactly what dealerships are doing nowadays. As a percentage of a dealership's total gross, profits fell in the new- and used-vehicle departments, but rose in service and parts.
The profit gains come after about a third of all U.S. light-vehicle dealerships expanded their service departments by at least one bay in the past 18 months to capture more service revenue. And with new- and used-vehicle price competition remaining intense. Going into a sales plateauing year, customer loyalty is going to be very key for dealers. That loyalty will come from expanding fixed operations' revenues. Dealership consolidation, increased hiring and dealers paying more for talent even as vehicle sales plateau and pretax profit margins remain flat. Initial findings show that at the average dealership, service, parts and body shop gross profits grew to 47.3 percent of the dealership's total gross profits in 2016, from 45.4 percent in 2015. In contrast, the new-vehicle department's gross as a percentage of total gross fell to 27.8 percent from 29.5 percent. In used-car sales, it was 24.9 percent, off from 25.1 percent.
The average dealership's revenue from sales - including new- and used-vehicle sales, finance and insurance and fixed operations - rose 5.1 percent to $59.6 million. The average number of new vehicles sold per dealership was 928, up from 916. The average selling price of a new vehicle increased 3 percent from 2015 to $34,449 and that of a used vehicle rose 2.5 percent to $19,866.
