CHICAGO — Dealer software provider MAXDigital released its third annual dealer research study on the subject of profitability and sales processes. In conjunction with Erickson Research, MAXDigital surveyed more than 430 dealers across the United States in late 2018.
Key findings from the research include:
- New-car profits are shrinking: 60% of dealers in the study reported new car profits were down the past two years, by an average of $170 per vehicle.
- Used cars are more profitable: Dealers reported higher profits on used vehicles compared to new. This is consistent with current NADA trends.
- Used car median profit: $1,500 to $1,999 compared to new-car median profit of $500 to $999.
- Trade-ins are an untapped profit source. Just 15% of dealers said the trade-in was a top profit source. And less than half of dealers are under allowing on the trade-in, with an average of just $250 per vehicle.
- Dealers are discounting away profits. 65% of dealers said they negotiate more than $500 off the listed vehicle price. This is up 9% from MAXDigital’s 2017 study.
Analysts suggested dealers focused on process change, a concept to which 45% of respondents were open. Dealers agreed regular training for sales staff was the biggest opportunity to increase profitability, seven in 10 respondents reporting their salespeople have told them they don’t have enough training or information.
“It’s tougher than ever to capture gross profits in today’s market, but this study shows that profits can be made by looking in the right places: trade-ins and pre-owned,” said MAXDigital’s executive vice president, Mike Cavanaugh. “To capture more gross, dealers need to treat trade-ins with the same level of importance as the front and back end, and make preowned a priority.”
To view the report in its entirety, click here.