Car Dealership Guy的动态

Are dealers walking into a profitability trap? After a couple of years of supply chain chaos, record profits, and inventory shortages, we’re supposedly heading back to "normal"… Pre-2020, dealers were grinding on sky-high incentives, shrinking margins, and overstocked lots. Nostalgic yet? And as we edge closer to what used to be “normal,” it’s clear — Going back to the old playbook could spell trouble. If dealers want long-term profitability, it’s time to break from tradition. Because the reality is — dealership profits are dropping. Margins on new cars averaged $2,326 through the first nine months, down 33.5%. But still way ahead of pre-pandemic days. What's driving profits down? Inventories are climbing, giving buyers more choices — but it also means fewer cars are selling above MSRP — aka slimmer profits. And with more cars in stock, costs are piling up... By Sept., floorplan expenses averaged $109,000 vs. last year’s $24,000 profit. The silver lining? Dealers haven’t lost all pricing power. Inventory is still about 20% below 2019 levels. But not all brands are created equal and nuances make a difference. Nissan, for example, is struggling. Its U.S. dealerships saw profits dive to a 15-year low — still wrangling with excess inventory and a lack of competitive products. On the other hand... Toyota and Lexus are keeping margins and throughput high. Luxury brands, too, are weathering the shift. Their average gross profit on new cars is $5,573, only down 17%. What's the takeaway here? Dealers’ top priority right now is protecting profitability across the board. But there’s a catch — Many "pandemic hires" from 2021-2022 have only known the high-demand, easy-commission market. And with that type of economic environment mostly gone — Many stores with inexperienced talent find themselves “weak and bleeding,” as one dealer told me. In the used car market, things have been more challenging since prices have corrected much faster. The used car market is finally stabilizing after a rapid price correction — but they are starting to become more predictable. Leading some of the most successful dealers to prioritize volume, reconditioning, and customer retention. This could mean lower front-end profits, but this is typically balanced out in the finance office. Even F&I profits are getting squeezed with today’s high car prices and interest rates. There's room to get creative... Simple strategies, like showing a buyer an insurance quote, can lift F&I gross by 18%. Then there’s the bedrock of dealership profitability: service and parts (gross profits here are actually up YoY). With car owners hanging onto vehicles longer, demand in this area remains strong. So, what’s next for dealers? Embracing the balance by sticking to fundamentals. The days of hitting easy home runs may be behind us, but steady singles and doubles will win the long game. Read the breakdown here, together with Lotlinx, Inc.: https://lnkd.in/e6DFJh45