NADA report shows dealers are hiring as sales plateau, costs rise

Dealerships are hiring, at good wages, even as new-vehicle sales plateau and pretax profit margins remain flat.Those trends are shown in the National Automobile Dealers Association’s NADA Data 2016 released Thursday.“The industry is continuing to recover and that recovery means that you are continuing to hire,” said Steven Szakaly, NADA’s chief economist.That hiring, of course, costs dealers, he said. Still, “You’ve got a lot fewer dealers, relative to the last time the industry sold 17.5 million vehicles, who are doing a lot more volume. They are expanding and you have to hire more people.”NADA’s annual report provides financial profiles of new-car dealerships based on 2016 data. The general retail industry overview was released this week, but dealers still have three weeks to participate in the full study due out this summer, said Szakaly.Rising costsNADA’s report showed that despite strong new- and used-vehicle sales, rising average selling prices on new and used vehicles, and increased customer-pay and warranty work in service, the average light-vehicle dealership’s pretax profit margin -- profits as a percentage of total sales -- eased to 2.5 percent in 2016, from 2.7 percent in 2015 and 2.6 percent in 2014, mostly because of rising costs.The average dealership’s total sales rose 5.1 percent to $59.6 million in 2016, but total expenses rose more sharply, 6.5 percent, to $6.5 million. In turn, pretax profit dropped 3.8 percent to $1.5 million.Advertising costs, for example, rose to $633 per new vehicle retailed from $606 in 2015. Rent climbed to $780 per new vehicle retailed, vs. $737 in 2015. Selling, general and administrative expenses rose 6.1 percent to $5.97 million.For hireOne reason for the rising expenses: Franchised dealerships directly employed a record 1,131,900 workers, a 2.4 percent boost from the previous year, the study found. The average dealership employed 69 workers in 2016, up from 66 in 2015.In addition, dealers are “paying more to attract and keep talent,” Szakaly said.Average weekly earnings of dealership employees rose 2.6 percent from 2015. Total annual compensation now averages $69,000 per employee, giving dealership employees one of the highest average salaries of any industry, the study said. The average weekly earning per employee was $1,122 with New Jersey, Massachusetts and California paying the most.Helping to drive up total compensation has been the battle for service technicians, said Szakaly.“The service-tech shortage is reflected in the rising wages and earnings,” he said. “That’s why you see these rising wages in what you pay people so you can attract people to the industry.”Total annual payroll rose 4.9 percent to $64.86 billion nationwide, or $3.9 million per dealership.Financial trendsTotal dealership sales revenue also grew 6.1 percent to $995.6 billion last year. The average per dealership was $59.6 million. Those figures include new- and used-car sales, finance and insurance and fixed operations.The average number of new vehicles sold per dealership was 928, up from 916, the study said. It found that the average selling price of a new vehicle increased 3 percent to $34,449. The average selling price of a used vehicle rose 2.5 percent to $19,866.The top 10 states in dealership sales, in order, were California, Texas, Florida, New York, Oklahoma, Pennsylvania, Illinois, Michigan, Ohio and New Jersey. The total number of new-car dealerships rose by 163 to 16,708 last year.New-car dealerships’ service and parts departments wrote 315.5 million customer repair orders in 2016, up 22 percent from the previous year. These orders included service, warranty and recalls.“More consumers are choosing new-car dealerships for their service needs,” said Patrick Manzi, NADA senior economist, in a statement. On average, express service, such as oil changes, at dealerships increased 11 percent and nonwarranty repair orders at dealerships rose 4.2 percent, he said.In addition to the average dealership profile section, NADA Data 2016 includes profiles of the average domestic, import, luxury and mass-market dealerships.The study is free to dealers who participate in it, Szakaly said.

NADA report shows dealers are hiring as sales plateau, costs rise

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