Used vehicle inventory levels increased to 83 days at year end from 78 days at the end of Q3 2017 due to lower fourth quarter sales volumes. Increases in advertising also affected the used vehicle department as advertising expense PUVR increased 17.3 percent from $272 per unit through Q4 2016 to $319 per unit through Q4 2017. Year-to-date gross per used vehicle retailed On a positive note, the average gross profit PUVR increased by $28 compared to 2016. Used vehicle grosses declined again in Q4 and the average gross profit per used vehicle retailed (PUVR) during 2017 was $1,284. This is up 9.3 percent from one year ago when 1.47 used trucks/SUVs were sold for every used car sold. The average dealer sold 1.61 used trucks/SUVs for every used car sold. Similar to new vehicle trends, used truck and SUV sales continued to outpace used car sales, although to a lesser degree. Through Q3 2017, 1.04 used vehicles were sold for every new vehicle sold, and by year end 1.01 used vehicles were sold for every new vehicle sold. The declining new vehicle sales volume in the fourth quarter was also felt in the used vehicle market, and to a stronger degree. Although the days’ supply is up from 108 days at the end of Q3 2017, the previous two quarters in 2017 exceeded 140 days, which represented the highest inventory levels in the last ten quarters as demonstrated in the graph below. New vehicle inventory levels increased to 119 days at year end due to lower Q4 sales volumes. This change was primarily due to two factors - an increase in short-term interest rates and declining new vehicle sales volumes.Īdvertising expense per new retail unit sold increased 27.4 percent from $221 per unit through Q4 2016 to $281 per unit through Q4 2017. The average dealership incurred $17 in floor plan interest per unit sold during 2017, while receiving $87 in floor plan assistance per unit sold in 2016. Net floor plan interest per retail unit sold increased $104 year over year, up from the $93 year over year increase noted through Q3 2017. Year-to-date gross per new vehicle retailed The following shows the trend in the average new vehicle gross per unit over the past ten quarters. New vehicle grosses per unit rebounded after declining during Q3 2017, but are still well below grosses in 20. The following shows the ratio of new trucks to new cars retailed for the past five years. Increasing demand for new trucks and SUVs has been occurring for a while. Trucks and SUVs represented 69.0 percent of YTD new vehicle sales, up from 64.3 percent a year ago (source: Stephens Auto Sales & SAAR survey, December 2017). The decline in net income as a percentage of sales compared to 2016 can be attributed to an increase in a dealership’s three largest expenses: personnel, advertising and floor plan interest. Year-to-date net income as a percentage of sales The following shows the trend in bottom line performance over the past ten quarters. Year-to-date net income as a percentage of sales for the average dealership was 1.14%, which is a slight decrease from 1.61% through last quarter and below the 1.48% for 2016. The annual average price of gas was $2.42 per gallon during 2017, which compared favorably with $2.40 per gallon during 2016. Gas prices continued to remain low throughout the year, attracting buyers to trucks and SUVs over cars. In addition, substantial numbers of off-lease vehicles are expected to enter the market in the coming years, which will put downward pressure on the new vehicle market. We previously noted the new vehicle sales cycle was anticipated to enter a downturn starting this year and analysts are forecasting 2018 new vehicle sales volumes will be comparable to 2017. Manufacturers continued to offer high incentives in order to spur sales, with incentive spending reaching levels in excess of 11 percent of MSRP. The fourth quarter slowdown was partially attributable to timing as September and October sales were buoyed by demand for replacement vehicles in hurricane stricken areas. (source: Stephens Auto Sales & SAAR survey, December 2017). For the year, the industry sold 17.1 million new vehicles, which was 1.9 percent less than 2016 sales of 17.5 million units. New unit sales were down 1.9 percent for the quarter, while December sales were down 5.1 percent compared to 2016. The fourth quarter of 2017, and December in particular, had lower new vehicle sales than 2016. Amounts and percentages noted herein are representative of the average dealership in our survey, unless noted otherwise. This whitepaper summarizes key data as of and for the four quarters ended Decem(Q4 2017), with comparisons to the same period in 2016 (Q4 2016) and to the three quarters ended Septem(Q3 2017). Respondents to the most recent study were primarily dealerships located in the Upper Midwest. On a quarterly basis, Baker Tilly conducts a benchmarking study of auto dealerships.
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