Elite Car Dealers Confident, But Depend More on Used Vehicles, Fixed Ops

Dealers on the WardsAuto Dealer 500 remain confident in their overall outlook for the rest of 2019 but are leveraging pre-owned sales and fixed operations as the new-car market softens.

General Motors’ U.S. sales fell 4% in the first six months of 2019 while Ford and Fiat Chrysler Automobiles slid 2.9% and 2%, respectively. Toyota sales were off 3% through June and Nissan dipped 9.2%.

The WardsAuto tally, which ranks the top 500 U.S. dealers by 2018 total operating revenue, reflects this trend.

The elite collection – consisting largely of dealer groups with geographic and franchising scale – posted new-vehicle revenue of $35,899,971,751, down from $36,469,382,511 in 2017.

New and used unit sales in 2018 down-ticked to 1,613,813 from 1,614,106 in 2017.

Total dealership revenue, however, increased in 2018 to $61,575,290,513 from $61,337,297,347 in 2018, thanks in large part to greater proceeds from used cars, finance and insurance, and service and parts.

Automakers and dealers alike have been enjoying the fruits of a nearly 10-year national economic expansion which is poised to become one of the longest periods of U.S. economic growth.

But dealers are feeling undercurrents that require adjustments to their operations.

Higher vehicle prices are driving some customers away from new purchases and toward the used-car lot. The average new-vehicle transaction price in April was $36,642, up 3.3% from year-ago levels, according to the National Automobile Dealers Assn. Compare that to the April average used-vehicle transaction price of $20,979. (But that’s still up 3.8% from 2018.)

“We have seen credit standards tightening in recent months, with a larger share of auto loans being made to more creditworthy customers,” says Patrick Manzi, NADA’s senior economist. (Patrick Manzi, left)

He notes uncertainty over “the implementation of tariffs on imported autos and auto parts, which if implemented later this year will cause new vehicle prices to rise and sales to fall.”

Wards Intelligence predicts light-vehicle sales of 16.8 million to 16.9 million this year after four years of deliveries exceeding 17 million units.

Still, consumer confidence remains high. The University of Michigan’s Index of Consumer Sentiment for June 2019 was 98.2, unchanged from a year ago.

“Good times during the year ahead were expected by 59% of all consumers in May, the highest figure since the start of 2015,” says Richard Curtin, the university’s director of Surveys of Consumers. “The proportion of consumers who anticipated an economic downturn during the next five years fell to 38%, the lowest level since 2004.”

Look for upcoming features on three auto retailers with dealerships on the list:  Serra Automotive Group, Zeigler Automotive Group and Larry H. Miller Dealerships.   

For the complete list of the WardsAuto Dealer 500 click here.

For the ranking’s index in alphabetical order, click here.