Profit

Used Car ‘Phenomenal’ Performance Drives Dealer Profits Up 27.5% in July


Auto retailers enjoyed a 27.5% year-on-year increase in profits in July as the appreciation in the value of used cars boosted the industry, according to ASE.

Monthly profitability KPIs for analytics and consulting retailers showed that retailers improved their profitability by almost £ 14,000 to £ 65,000 during the month as an imbalance between supply and demand made used car value skyrocket.

ASE said a strong start to the second half of the year pushed the 12-month rolling average Return on Sales (RoS) to 2.17% – a huge increase from the 0.37% achieved during 12 rolling months until July 2020.

Mike Jones wrote the report. He said: “The phenomenal used car performance continued to be the main driver of the current strong profitability, with a 12 month ROI now sliding to almost 100%.”

He added: “Stockturn is now below the 45-day benchmark, reflecting the strength of current market demand.”

Earlier this week, Phillip Nothard, chief analysis and strategy officer at Cox Automotive, warned that UK car dealers will have to compromise on their usual inventory demands in order to fill their forecourt in a now sector. “Empty of stocks”.

But dealers at last night’s AM Awards event were positive about the market momentum.

An AM100 car retail boss said, “I can see the strong margins and the supply of used cars continue to the point where we are able to benefit from an influx of new cars into a market. ready to benefit from strong pent-up demand. in 2022. I think the outlook is really positive.

As the auto industry struggled to cope with a ‘tsunami’ of aftermarket activity in September – the result of DVSA’s MOT extensions at the request of COVID in 2020 – ASE reported that July had also improved trade for the workshops of the sector.

Overhead absorption continued to rise in July, Jones reported, with nearly two-thirds of the company’s overhead costs now covered by aftermarket profits.

He added, “We continue to see managed overheads with strong aftermarket profits, even despite the MOT vacation hangover from the previous year.”

As the government’s COVID-19 rate rebate began to decline in July, ASE also reported that its data showed only a slight increase in costs during the month.

But the report adds, “Containing costs will be vital to protecting recent gains in overhead absorption. “

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