Car dealer losses grew to £18,000 in February, ASE reports

Car retailers posted a monthly loss of £18,000 in February as new car margins continued to deteriorate ahead of a disappointing month of registrations in March.

In its latest profitability statistics ASE revealed that the average UK motor retailer posted a loss £4,000 greater than that recorded in February 2017 during the second month of 2018.

The data shows the strain being felt by car dealer groups in a month which saw a 2.8% year-on-year decline in new car registrations and comes ahead of Q1 results which ended with a 15.7% year-on-year registrations decline in March, the SMMT revealed.

ASE said that February’s fall in dealer profitability continued the trend of increasing mid-quarter month losses and reverses the gains made during January, leaving the average retailer £2,000 behind on a year-to-date basis.

In his report on the new car sales performance of recent months, ASE chairman Mike Jones said: “Whilst we will have to wait until the March results to see the full bonus earnings, the lower volumes of new vehicle sales have had an effect on February profitability.”

Used car performance for the month of February remained strong, according to Jones.

He said that healthy levels of return on investment and used vehicle stock days meant that, although retailers were running with higher than desired levels of stocks, the pressure was being well managed and used cars remain a “very lucrative profit stream as new car performance falls back on the prior year”.

Aftersales is also showing signs of strength for the sector, according to ASE’s data.

Key service ratios showed a slight deterioration on the prior 12 months but profitability from aftersales has continued to grow, Jones said in the monthly report.

He added: “We are starting to see increased capacity to go alongside the increase in the size of the vehicle parc. This provides significant opportunity for retailers to increase their VHC upsell.”

Reflecting on retailers’ prospects for the year ahead, Jones said: “The outlook for 2018 clearly depends heavily on the overall Q1 performance.

“Whilst new vehicle registrations were significantly down, the majority of this downturn happened right at the end of the month of March.

“Hopefully this means lower self-registrations with a lesser impact on overall profit generated.”