New-car dealerships make an average of $7.1 million in profit.
It is not secret that inventories of new vehicles are still low. Limited supplies have driven the prices up, it’s not surprising. We all know about the widespread dealer markups. But with fewer vehicles available, is this causing these companies financial problems as automakers? It appears that the answer is a huge no, written in capital letters and with an exclamation mark.
The first three months of 2022 have shown that dealerships are not only surviving but also thriving at an unprecedented level. Haig Partners recently released a report that examines data in the retail automotive market. The results are clear. Average gross profit per new car is $6,244. This is a 180 percent increase over pre-pandemic levels for 2019, and with supply chain issues still a major concern due to COVID-19, and the chip shortages, this trend is expected to continue throughout 2019.
Record-breaking dealership profits are due to the skyrocketing per vehicle haul. According to the report, public-owned new car dealerships made an average profit of $7.1million in the 12-month period ending March 2022. This is a 242 percent increase over the pre-pandemic world in 2019, and shows that buyers have the cash they need and are willing to pay more than MSRP to get the vehicle they desire. This trend can last for at least two to three years, provided that record fuel prices do not spiral the economy into recession.
This report also shows how dealerships have seen their value rise. Business-minded people are eager to get a piece. The total number of dealerships purchased by public companies in 2021 was 216, a 645 percent increase over the five-year average. According to the report, private buyers purchased 424 dealerships in 2021. This is a 34% increase over pre-pandemic levels.