PROFITS on new and used car sales came under increasing pressure in March, despite the surge in activity prompted by a new plate, say the independent car information experts CAP Automotive.

Exclusive insights into business performance are shared between dealers each month in a unique survey coordinated by CAP which is then used by professionals across the motor industry to help them better understand their commercial landscape.

Despite a strong new and used car sales month in March 41% of dealers reported that margins were tighter than the month before. This signals a change on the picture a year ago, when CAP’s own research revealed that average margins had increased over the previous 12 months by £277.  

Although some dealer groups are seeing an increase in used car profit per unit, margin decline is still an underlying problem for many dealers. 

At the heart of it are a range of issues. One is that over the past 12 months there has been a decline in the condition of cars typically available for stock, as volume increases. Lower quality means higher preparation outlay at a time when workshop running costs are growing faster than retail prices. Other pressure on retained margins comes from auction fees and transport costs.

Despite March bringing an influx of fresh stock into the marketplace – due to an increase in part-exchange vehicles – only 23% of dealers described the choice of cars available as “better”.  This signals further profit erosion in the coming weeks as those cars will also need refurbishing for retail, just as consumer demand is expected to reduce after Easter.

The latest inter-dealer survey also reveals that online consumer interest increased during March more than physical visits to showrooms.

Online activity grew significantly in March for 62% of dealers, with the figure for increased physical showroom visits lagging some way behind at 51%.  This indicates that, for many consumers, the car sales activity of a new plate month sparks additional attention and interest without translating into a decision to purchase.

Philip Nothard, of CAP Automotive, said: “Dealers may, on the surface, be enjoying a very successful time but the number of sales isn’t the whole story.

“The squeeze on margins is a constant complaint and the problem is fuelled by a general deterioration in the quality of the majority of cars now available in the market, which forces them to invest much of their potential profit in refurbishment.”

ENDS

More highlights from 'The Market Survey - By Dealers, For Dealers' - March 2015