Baker Tilly automotive dealership benchmark survey – 1st quarter 2014

On a quarterly basis, Baker Tilly conducts a benchmarking study of auto dealerships. Respondents to the most recent study were primarily dealerships located in the Upper Midwest. This whitepaper summarizes key data as of and for the quarter ended March 31, 2014, with comparisons to the same period in 2013 and to the four quarters ended December 31, 2013. Amounts and percentages noted herein are representative of the average dealership in our survey, unless noted otherwise.

The bottom line

Overall, dealership profitability remained comparable with the same period one year ago. Net income as a percentage of sales was 1.34% for the first quarter of 2014, compared to 1.36% for the same period one year ago.

New vehicle sales

Industry-wide, new vehicle sales volumes are higher than last year.  In a survey by Stephens, new unit sales through March 2014 were 3.73 million versus 3.68 million last year, an increase of 1.3%. Grosses per new vehicle retailed (PNVR) have also improved.  A comparison of recent grosses PNVR is as follows:

Time periodGrosses PNVR
Quarter ending March 31, 2014$1,031
Quarter ending March 31, 2013$1,019
Four quarters ending December 31, 2013$ 991

New vehicle sales continue to outpace used vehicle sales, although the market seems to be shifting to used vehicles.  The ratio of new to used vehicles sold was 1.01 for the first quarter of 2014, which is down from 1.10 for the first quarter of 2013 and from 1.21 for all of 2013.

The average dealership continues to carry more new vehicle inventory. The days’ supply in units was as follows:

Time periodDays’ supply
Quarter ending March 31, 2014146.7
Quarter ending March 31, 2013118.1
Four quarters ending December 31, 2013117.8

On a positive note, advertising expense PNVR for the first quarter decreased 3% from $187 as of March 31, 2013 to $181 as of March 31, 2014. However, floor plan interest earned (floor plan interest, net of floor plan assistance) PNVR decreased $26 from $45 for the first quarter of 2013 to $19 for the first quarter 2014.

Used vehicle sales

The average gross per used vehicle retailed (PUVR) decreased slightly from a year ago and compared to the four quarters ended December 31, 2013.  Gross PUVR was $1,469 for the first quarter of 2014, $1,475 for the same period last year, and $1,482 for the year 2013.

YTD gross profit per used unit retailed

 

Although used vehicle sales volumes for the first quarter have increased compared to the first quarter of 2013, the average dealership was carrying slightly more inventory than a year ago. The days’ supply in units as of March 31 was 90.5 days compared to 89.0 days last year.  However, used vehicle inventories decreased compared to the previous quarter, which had a days’ supply in units of 93.1 days. 

Finance and insurance (F&I)

The F&I department’s improved performance during 2013 continued through the end of first quarter 2014. Since December 2013, net F&I income before compensation increased 2.46% for new vehicles and 7.98% for used vehicles. Comparing first quarter 2014 to 2013, net F&I income before compensation per unit sold was down 3.97% for new vehicles and up 2.22% for used vehicles. On a per retail unit sold basis, net F&I income before compensation was $796 for new vehicles and $641 for used vehicles as of March 31, 2014.

Finance penetration rates are comparable to the prior year, averaging 68.1% for new vehicles and 58% for used vehicles.  Extended service contract (ESC) penetration rates are also comparable to the prior year, averaging 40.1% and 38.9% for new and used vehicle sales, respectively.  The decreases in ESC penetration rates we saw through December 31, 2013 rebounded in the first quarter of 2014. The new and used ESC penetration rates for the year 2013 were 39.0% and 36.7%, respectively.

Service

The average service department was more productive in the first quarter of 2014 compared to the first quarter of 2013. Although the average customer pay shop rate increased from $100 to $103 per hour, there was also an increase in labor hours per customer-pay repair order (RO) based on standard shop rates – from .95 hours for first quarter 2013 to 1.00 hours for first quarter 2014. The combination of an increased shop rate and more hours per customer pay RO resulted in a 1.67% increase in customer labor gross per technician per month compared to March 31, 2013.

Customer pay labor represented approximately 51% of service sales as of March 31, 2014, compared to approximately 53% as of March 31, 2013. The two-percentage point decrease in customer pay labor has been offset by increases in service warranty labor sales.  Although there has been a change in the mix of service work, it has not had a significant negative impact on the service department.  Service gross profit was 65.9% as of March 31, 2014, compared to 66.0% last year.

YTD service gross profit percentage

 

Parts

Along with the increase in service productivity, parts productivity for the first quarter 2014 also increased compared to first quarter 2013.  The average parts sales per counterperson per month increased 4.86% to $81,323 as of March 31, 2014. Parts gross profit in the first quarter of 2014 increased slightly to 31.85% compared to 31.56% for the first quarter of 2013.  The increased productivity, coupled with the small increase in gross profit percentage, resulted in a 5.42% increase in the average parts gross per counterperson per month:

Time periodAverage monthly parts gross per counterperson
Quarter ending March 31, 2014$25,959
Quarter ending March 31, 2013$24,596

Parts inventory levels have remained relatively stable, hovering between 59 and 60 days’ supply as of March 31, 2014 and 2013, respectively.

Body shop

The body shop department was also more productive in the first quarter of 2014 compared to the same period last year, as evidenced by a $1,579 (19.1%) increase in total body shop gross per technician per month. The bulk of this productivity was related to labor, as the total body shop customer labor gross per technician per month increased $1,155 (18.3%) for first quarter 2014 compared to first quarter 2013.

Conclusion

The gains in fixed operations productivity and vehicle grosses have been offset by increased expenses, particularly utilities which increased to 28.7% of sales for first quarter 2014 compared to 24.4% for first quarter 2013.  As a result, profitability through first quarter 2014 is comparable to that of first quarter 2013.  Dealerships will need to find ways to maintain their productivity gains while watching expenses in order to achieve the profitability levels of 2013.

If you would like a more detailed analysis of how your dealership compares to our survey, please contact our dealership industry specialist team.