By Arlena Sawyers, Crain News Service
DETROIT (April 20, 2015) — Auto dealerships added to their employee count for the fifth year in a row last year, causing the average store's payroll to rise sharply above its prerecession level.
The average new-car dealership employed 64 people in 2014, up from 57 in 2013 and a steady 53 in 2005-08.
That lifted the average dealership's payroll to $3.6 million in 2014, up 5.9 percent from 2013 and 38 percent from 2005.
Those are among the findings of the National Automobile Dealers Association's (NADA) annual report on vehicle dealership sales and financial trends, released this month.
Car dealers paid one of the highest wages for any retail trade in 2014, the report said, an average of $55,000 per employee. Total payroll for all dealerships was $58.11 billion.
But despite bigger payrolls and total expenses that rose 4.7 percent at the average dealership, increased new- and used-vehicle sales, as well as additional service business, helped keep net pretax profit margins — net pretax profits as a percent of sales — at 2.2 percent for the third straight year, the report said.
NADA Chief Economist Steven Szakaly said dealership margins did not climb in part because of fierce industry competition. But keeping net profit margins stable is a testament to the efficiency of the retail auto industry, he added.
“Any low-margin business is going to watch their costs per unit very, very carefully, and that is exactly what happened,” he said.
The average dealership's total revenues rose 7.1 percent in 2014 to $49.2 million, climbing in part due to higher vehicle transaction prices. The average total gross — revenues minus cost of goods sold — rose 5 percent to $6.5 million.
U.S. new light-vehicle sales grew 5.9 percent in 2014, while the overall number of new-car dealerships rose less than 1 percent, according to dealership census data for 2014 compiled by Automotive News.
More big stores
One result is that the number of retail outlets, also known as rooftops, that sold fewer than 150 new vehicles dropped 19 percent last year to 3,483, NADA data show.
The number of outlets selling 150 to 399 new vehicles rose 3.3 percent to 4,918; the number that sold 400 to 749 vehicles rose 8 percent to 3,484; and the number selling 750 or more vehicles increased 16 percent to 4,511.
While consolidation in the form of a red-hot buy-sell market played a role, Mr. Szakaly said the shifts mainly reflected rising industry sales. “Because the market is rising so much, even the smallest dealerships are moving up [in sales volume] as well. The data supports that,” he said.
Mr. Szakaly said retail dealership consolidation is occurring but added that small, rural dealerships in particular represent a competitive advantage for auto makers.
“They move good volume and provide a point of service and a point of contact in places that you may not otherwise have any other retail facility,” he said. “This is very important for the OEMs. It's not a hindrance.”
The average dealership's total spending on advertising rose 3.7 percent to $494,776 in 2014. Increased vehicle sales per dealership caused advertising expenses per vehicle to dip to $608 from $616 a year earlier.
The Internet continued to grab the lion's share of the average dealership's advertising budget last year. The average dealership plowed $130,324 into online advertising, up 4.9 percent.
Radio tops newspapers
Last year also marked the first time in recent history that the average dealership spent more on radio advertising than on newspaper ads. The average dealership spent $78,125 on radio, up 7.1 percent; newspaper ad spending edged up 0.3 percent to $73,771.
Mr. Szakaly also noted some important differences in NADA Data 2014 from previous years' reports. This year's report contains statistical data for the 2014 calendar year while last year's report, also titled NADA Data 2014, contained statistical data for the 2013 calendar year.
NADA changed its methodology for calculating some data contained in the most recent report, Mr. Szakaly said. That means that some data contained in previous NADA Data reports are not comparable with data in this year's report.
However, all of the historical data contained in the current report have been updated, he said.
“We redid our sampling. We redid our weighting,” he said. “There were a number of things in the background that changed because it became outdated. It was just time to go back and revisit and revise it.”
This report appeared on the website of Automotive News, a Detroit-based sister publication of Tire Business.