NADA: Dealer Profits Soared through May

WASHINGTON - The average dealer's net profit before taxes nearly doubled in the first five months of the year over last year, to $278,814, Automotive News reported based on data from the National Automobile Dealers Association.

The average net pretax profit margin was 2.3 percent, up from 1.3 percent in May last year.

Net margins above 2 percent have been rare over the past 30 years, NADA records show.

NADA attributed the strong results to healthy sales increases in new- and used-vehicle departments, higher new- and used-vehicle profit margins, radically reduced vehicle inventory and low interest rates.

“All key financial numbers are up year to date,” said Paul Taylor, NADA's chief economist. “The retail automotive market is getting better slowly but surely this year.”

The biggest savings came in inventory financing. With production cuts and lower interest rates, floorplan interest cost per vehicle dropped 117 percent. In May, the average dealership had a $23 credit balance per vehicle in its floorplan account. That means the financial assistance that factories pay dealers to order new vehicles more than offset the dealers' interest expense per vehicle.

“Low interest rates are keeping inventory costs low this year, but some popular trucks and cars are in short supply because of production cutbacks and factory closings,” said Taylor.