Car dealer profits increase by 6.7%

DETROIT — The average profit of the nation’s auto dealers rose 6.7 percent last year to nearly $1.1 million, but the average profit margin remained at 2.2 percent, the same level it has been since 2012, according to the annual report from the National Automobile Dealers Association.

But to achieve that profit margin dealers are relying more than ever on used car sales and their service and parts departments, both of which are more profitable than selling new vehicles, the report showed.

“Total dealership gross margins fell for a fifth year in a row to 13.1 percent of total dealership sales from 13.4 percent in 2013,” NADA chief economist Steve Szakaly wrote. “While total expenses were up 4.7 percent, productivity gains and increased throughput (sales) helped to ensure that expenses declined as a percentage of sales to 10.9 percent from 11.2 percent in 2013.”

Sales from parts and service jumped 8.4 percent to $91.7 billion, fueled by a record wave of recalls, particularly by General Motors. The average dealership did $5.6 million of service and parts work, up from $4.8 million in 2013.

Another interesting factoid: Americans are holding on to old cars. The ratio of vehicles scrapped to new car registrations fell to 11 million, down from 14.2 million in 2012. Because new car sales rose 6 percent to 16.4 million, the ratio of scrapped vehicles to new car registrations dropped to 67.5 percent from 75.6 percent in 2013.

The average dealership employee earned about $55,000, up 1.9 percent from 2013. New Jersey dealership workers earned an average of $64,700, the highest of any state. Wisconsin had the lowest average income at $43,300.

The report breaks down new vehicle sales in each state by cars and light trucks, which includes pickup trucks, SUVs, vans and most crossovers. The most truck-dominant state was Alaska (73 percent), followed by Wyoming (71 percent) and Montana (67 percent). The lowest truck-buying state was Rhode Island (44 percent).