Concerns raised over dealer profitability

Dealers may be celebrating a successful 2015 with sales of new cars at an all time high, but newly-released figures show that profitability during November dropped.

The figures published by automotive profitability specialists ASE revealed that the average dealership lost £10,800 in November 2015, which is traditionally a tricky month for sales as customers start thinking about buying Christmas presents rather than cars.

The profitability of your business will impact on your insurance coverage. The start of the year is a good time to check that you are adequately insured, both with your motor trade insurance and road risks insurance policies.

Data from ASE showed that new car sales in November 2015 were down by around one per cent on the same month the previous year. However, it found that used car sales increased and said that the new-to-used car ratio was now approaching parity.

Despite this, ASE said that there was a “concerning” fall in used car return on investment as dealers increased their levels of used car stock. Gross margins for used car sales dipped below the 10 per cent levels for the first time since the recession during November. ASE said this was due to a combination of increased average values and lower gross profitability.

Dealers will now be studying their December sales figures to see whether the final month of the year showed improvements. Franchises generally receive their annual bonuses during December, which helps to compensate for the number of trading days lost due to the Christmas break and bank holidays.

According to Car Dealer magazine, some franchises are now taking part of their annual bonuses during the year, which could impact the importance of December to the final figures. It said this could affect the year’s overall profitability even though new car registrations are up year-on-year.