Private Car Dealers Get Huge Profits from Increased Sales

Privately held auto dealers have driven their sales higher for the third straight year. The pace of the increases has slowed down compared to last year. This was according to the data from Sageworks, a financial information firm.

Sales at privately held auto dealers in the 12 months that ended August 31 were 8.2 percent higher compared to the same period last year. In the year that ended August 2012, it increased 12.8 percent. In the year before, the growth was 14.1 percent.

The increases are vital because companies that are privately held dominated new car sales in the United States. Publicly traded auto dealer groups such as CarMax and AutoNation have been in the headlines but performed less than privately owned ones.

Most of the top 10 auto dealers in the United States are publicly traded but the majority of the other 90 companies that are part of WardsAuto’s 2013 Megadealer 100 list are private companies. The list of 100 dealers combined accounts for just 2,339 of around 17,900 dealerships in the nation. 16 percent of new cars and 5 percent of used vehicles were sold in 2012.

Sageworks uses financial statement analysis of private companies. The data is consistent with statistics of the government on auto dealers. Estimates of retail sales showed auto and other motor vehicle dealers in August showed 1 percent growth from July and 12.3 percent gain from the previous year.

New and used vehicle dealers in the database have seen profit margins grew stronger over the past 12 months. Average net profit margin for the 12 months that ended August 30 was almost 3 percent, compared to 2.4 percent in the previous year.

The latest profit margins are more than a full percentage point above the average margin in the year that ended August 2010. Auto dealer margins are usually lower than many other types of retailers.