The new car market does look set to hit a record level in 2015 but dealer profitability certainly doesn’t, warns ASE Global chairman Mike Jones.

ASE’s data shows the average UK motor retailermade a profit of £7,000 in October, a £2,000 improvement on their result for the October 2014. This pushed the return on sales percentage slightly upwards although at 1.37% it remain significantly behind the prior year.

The fall is a result of a 7.5% fall in year-to-date profit being exacerbated by a 3.9% rise in turnover levels, said Jones.

He said October saw a drop in registrations for the first time in a year as a number of brands reduced the registration pressure which had a knock on effect on reduced dealer self registrations. 

New vehicle sales were down 4% in the month compared to a drop in registrations of 1%, indicating that even in a month when the industry paused for breath, there was still an increase in self registrations. On a year to date basis, new vehicle sales are marginally behind last year, in a market which is 6.4% up.

Used vehicle sales continued to perform strongly as the self registered cars were remarketed, with used volume up 2% in the month and 6.5% year to date.

“The drop in used car return on investment is slightly concerning and dealers need to manage this. October saw the double whammy of a drop in average used vehicle gross to 3% below the rolling 12 month average and an increase in average stand-in-value to over £9,500, which is 3% above the recent average,” he added.

Overhead absorption continued its decline, dropping 0.4% in the month. Jones said that whilst October should be a relatively good aftersales month dealers, on average, only absorbed 54% in the month, which is significantly down on last years 59%.

“Whilst profits were slightly down, the biggest driver in this was an increase in overheads of 6% year-on-year. This is a trend we expect to see continuing.

“Whilst we look dead set to hit a record level of new car registrations in 2015, we are not going to match that with record profits.”