This is one of my favorite times of year as I anxiously await the release of the NADA Data report for the previous year, a publication that is always chock-full of juicy statistics that provide an overall barometer on the health of the franchise dealer segment.

This year’s report is out (https://www.nada.org/nadadata/) and the 2016 report doesn’t disappoint.

Let’s dig into some of the more interesting highlights:

For the average franchised dealership location, sales were up from $56.7M to $59.6M (+5.1%) , but net Profit before tax was down from $1.50M to $1.47M (-2.0%).

Good news was that the average number of new cars retailed per dealership increased from 916 to 928. The bad news is that new vehicle net profit per car sold went from a $22 loss per unit to a $217 loss per unit.

Used car sales per franchised dealership increased from 677 to 703, while retail gross profit per used unit retailed was down from $2,444 to $2,415. Retail net profit per used vehicle retailed decreased from $132 to $65 per car sold.

Advertising expense as a percentage of gross increased from 8.4% to 8.7% (increased from $606 to $633 per new vehicle retailed).

Across the average franchised dealer’s entire operation, net profit before tax decreased from 2.7% of sales to 2.5%, as dealership operating profits continue to get squeezed.

In 2016, new vehicle days supply averaged 74 days for domestic brands and 54 days for import brands.

As we enter a period of increasing headwinds over the remainder of the year (increasing inventories, new car incentives at all-time highs, a wave of used cars coming off lease, weakening consumer demand, softening sales, used car prices dropping and interest rate increases), it’ll be interesting to see if and how dealer profit margins continue to get compressed.

Dealer Margin Compression