New-car dealership profits remain steady at 2.2%

For the third straight year, net pre-tax profit at new-car dealerships as a percent of total sales was 2.2%, according to the most recent yearly analysis from the National Automobile Dealers Association (NADA).

“Fierce price competition among dealers for sales and service left dealership profitability unchanged for the third straight year,” said NADA chief economist Steven Szakaly. “The 2.2% figure represents sales in the new- and used-vehicle, service and parts departments. That’s more than a full percentage less than many other retailers.”

NADA Data 2014, the annual report on dealership sales and financial trends from the industry trade body, shows that total dealership revenue, which included new- and used-car sales, as well as parts and service, reached an all-time high of $806 billion in 2014, an increase of 8.6% from the previous year.

The average retail-transaction price of new cars and light trucks increased to $32,618, up 2.7% from 2013. Average used-vehicle retail prices also moved higher by 4% to $18,846.

The number of retail customers purchasing a new- or used-vehicle service contract remained effectively unchanged at 41.7% compared to the previous year, the report said.

Combined recall and warranty work performed by new-car dealers in the US increased by 21.6% to $8.5 billion in 2014.
The report says over 1.05 million people were employed at US new-car dealerships in 2014, which is higher than any other auto-related industry. Annual payroll at new-car dealerships was more than $58.1 billion in 2014, an average of $3.5 million per dealership.