NADA, the National Automobile Dealers Association, has released its 2020 survey of financial results of its members, and the numbers are as big as the trucks and SUVs they’re selling. The average U.S. dealership booked a net pretax profit of $2.1 million last year, a 48 percent leap from 2019. The 2020 figure also topped the previous record of $1.5 million, recorded in 2015.
The reasons? The pandemic tightened inventories, reducing or eliminating the need for dealer incentives. It also created incentives to reduce manpower, as selling increasingly went more on-line and virtual. In fact “selling” wasn’t really much needed in 2020; it’s was more like “this is what we have in inventory, take it or leave it, because it’ll be gone by tomorrow”. A seller’s market, in other words. And that spikes profits like nothing else.
The average gross profit per new vehicle jumped to $2,444 from $2,010, and to $2,675 from $2,375 per used vehicle, up 22% and 13% respectively from 2019.
Costs were trimmed an average of 5.6%. Increased digital retailing increased productivity. And floorplan expenses were trimmed due to lower inventory and interest costs.
And most US dealers took out forgivable Paycheck Protection Program loans last spring. It’s not possible to tell precisely how those affected profitability, but most likely there was an impact.