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Profit Margins on New and Used Car Sales Growing Slimmer

Posted by Collin Davis on 05/23/2016

The National Automobile Dealers Association has released its annual report on new care dealerships, providing a financial profile for the industry and the dealerships like yours that continue transforming the auto sales industry—and continue to respond to the transformations that have been thrust upon the industry by new technologies and consumers with new and changing needs.

There’s always something interesting in the NADA Data report, and this year is no exception. While in many ways 2015 was a great year for new light vehicle dealerships across the country, there was one detail we just couldn’t overlook. Sales dollars from new vehicles… Read More

The National Automobile Dealers Association has released its annual report on new care dealerships, providing a financial profile for the industry and the dealerships like yours that continue transforming the auto sales industry—and continue to respond to the transformations that have been thrust upon the industry by new technologies and consumers with new and changing needs.

There’s always something interesting in the NADA Data report, and this year is no exception. While in many ways 2015 was a great year for new light vehicle dealerships across the country, there was one detail we just couldn’t overlook. Sales dollars from new vehicles as a percentage of total revenue rose slightly for the average dealership in 2015—from 57.6% of dealerships’ sales dollars in 2014 to 57.9%in 2015, gaining most of that ground at the expense of sales dollars from used vehicles—but net profit on new vehicle sales actually dropped.

For used vehicles, the net profit seen in 2015 was cut nearly in half compared to 2014.

In other words, even as more people are buying cars, and even as more of the cars being bought are new rather than used, dealerships are making less on every sale. These are all clear signs that competition is back in full swing after the Great Recession, with more consumers out there buying cars but dealerships slashing prices and margins in order to grab more of that market for themselves.

Lower margins might not seem like a great thing, but increased competition can definitely work to your advantage—as long as you know how to take advantage of it.

Dealerships Need to Grab Attention Early, Then Follow Through

With new car sales advancing over used, and with profits dropping even faster on used vehicles, focusing on new car sales seems a likely bet for the near future. At the same time, many new car buyers might be initially attracted by used car options; if you can get them to look while they’re on your website (or on your lot), and if you’re willing to wiggle a bit when it comes to the final price, you can turn many used car shoppers into proud new car owners.

Variety is key. Offer enough options to get them attracted to your dealership in the first place, and give them the right information in the right format to get them to click on over to other recommended options, or to come on down to the dealership check things out in person.

After that, good old fashioned salesmanship still wins the day, every time.

Don’t Wait. Create Your Dealership’s Sales Opportunities

Customers aren’t going to find you on their own, and they certainly won’t be driving up your profit margins any time soon. Don’t wait around for things to change—take charge and start creating more sales opportunities in today’s expanding and competitive auto industry!


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