DETROIT (July 31, 2013) — The average number of unit sales per car dealership in the U.S. will continue to rise this year, driving dealership profitability higher, before leveling off next year, according to a new report.
The average number of sales per dealership, or throughput, will rise 8 percent this year to a record 877 units, based on projected vehicle sales of 15.6 million, according to Urban Science Inc., a global retail consulting firm in Detroit, in its midyear Automotive Franchise Activity Report.
The predicted rise would extend an unprecedented throughput increase to four straight years. In 2012, throughput rose 13 percent to 812, by Urban Science's count.
"While throughput levels are on track to crush last year's all-time high, we believe we're hitting the top of the curve," said Urban Science Vice President John Frith.
"If we follow historical trends, throughput increases should slow in the next year or two before they start a mild decline."
Mr. Frith noted auto makers are keeping their retail networks "stable even as sales continue to rise." LMC Automotive Ltd., for instance, forecasts sales of 15.6 million units this year.
Urban Science's midyear report shows a slight decline in the number of U.S. dealerships and franchises since year-end 2012. As of July 1, there were 17,780 dealerships, a 0.4-percent drop from January, and 31,409 franches, a decline of 0.6 percent.
The retail network stability creates "a tremendous opportunity for dealerships to reap the benefits of the industry's most profitable periods in two decades," Mr. Frith said.
The majority of dealership closures in the past seven months resulted from the loss of the Suzuki brand, which resulted in the phase-out of 222 franchises, including 125 stand-alone dealerships, the report said.
The rest of the network generally remained healthy and grew slightly since the beginning of the year.
On a state-by-state level, the most significant net dealership declines occurred in New Jersey, which lost eight dealerships, followed by Missouri and Pennsylvania which each lost seven dealerships, the report said.
California experienced the most significant dealership increase, gaining 20. Texas added four dealerships and Arkansas, Louisiana, Nevada and Tennessee added two each.
Founded in 1977, Urban Science describes itself as a global retail consulting firm that takes a scientific approach to help companies identify where they should allocate resources in order to increase their market share and profitability in the most effective and efficient manner.
AT THE SAME TIME, another study, from J.D. Power & Associates, shows that leasing — once primarily a tool for selling luxury vehicles — is becoming more common among family sedans and helping to drive the industry's sales growth.
Supported by high used-car prices, low interest rates and Americans' tendency to buy vehicles based on the monthly payments, U.S. auto leasing is at its highest levels in at least a decade.
"It's a great way to present a product at very affordable monthly prices," said Peter DeLongchamps, a vice president for Group 1 Automotive Inc., the fourth-largest U.S. auto dealership group and one of the nation's biggest Toyota retailers.
"There's absolutely no question" Toyota is using leasing to contend in an increasingly competitive mid-size car segment, he said.
Leasing's share of U.S. new-vehicle sales has been at least 22.5 percent in every month this year, according to J.D. Power. The four top months for lease penetration in the last decade, the extent of J.D. Power's data, were in 2013, and each of the year's first six months rank among the top nine, the researcher said.
The momentum from leasing is driving U.S. car and light truck sales to a six-year high. Deliveries may climb 15 percent for July to 1.33 million, the average estimate of nine analysts in a survey by Bloomberg News.
The annualized industry sales rate, adjusted for seasonal trends, may climb to 15.8 million, the average of 15 estimates, from 14.1 million a year earlier.
The industry sales pace for the month keeps the U.S. on track for its best year since 16.1 million vehicles were sold in 2007.
Jamie LaReau is a reporter with Automotive News, a sister publication of Tire Business. Automotive News reporters Megan Durisin and Craig Trudell contributed.