By on January 3, 2022

With so many articles discussing how poor automotive sales have been through 2021, one could be forgiven for thinking this was going to be a hard year for anybody owning a dealership. However, the reality of the matter is that it’s a seller’s market and those who can sell are making a killing off everyone else’s misery.

The National Automobile Dealers Association (NADA) has reported that the ongoing deficit of product has helped the average store rake in more money than they did in 2020, breaking the previous twelve-month profitability record. Today’s average dealership is reporting a net pretax profit of about $3.38 million through October for 2021. That’s more than twice what was tallied within the same timeframe last year and really goes to show how much money can be made when the customer’s needs are the only items being discounted. 

We’ve covered escalating automotive pricing for a while now, with Matthew Guy having just shared the latest on the absolute madness that is the secondhand market. That piece also explores some of the long-term ramifications of having the market that’s gotten so far out of whack — which could be handy for anyone thinking about purchasing another vehicle soon.

But it’s really not much better for those buying new. Thanks to dealer markets and lengthening loan agreements, margins are high across the board. NADA estimated that the U.S. retail gross profit per new vehicle was averaging around $3,928 for 2021, whereas used vehicles were averaging at a very close $3,651 per unit.

Those estimates are conservative and fail to take into account just how much rates have pitched up in the latter months, however. If we take a look at December, most tracking the market have the new vehicle profits averaging around $5,000 per car. For example, J.D. Power recently told Automotive News that the average dealership made roughly $5,200 on every new car sold last month — which is more than triple what they were making over the same period in 2019.

From AN:

The good times — for dealers — should continue into the new year: 2022 is likely to be the most profitable year dealerships have ever recorded, as inventories remain at near-record-low levels, said Tyson Jominy, J.D. Power’s vice president of data and analytics.

While production is expected to rebound this year, the additional volume should be quickly absorbed by retail and fleet customers starved of vehicles last year. “With 4 million to 5 million units of pent-up demand, vehicles are barely going to touch the dealer lot before they are delivered,” Jominy said.

The only real positive angle there is to this is the fact that the extremely lean volumes we’ve encountered all year finally pitched back up in December. New-vehicle inventories were at an insanely low 15-day average for both October and November. However, December saw the number increase by anywhere between 2 to 5 days, depending on who you’re asking. According to NADA, the number of used vehicles retailed by the typical U.S. dealership through October also rose by 6.3 percent. Though this did nothing to harm profitability, as gross profit continued to climb by 67 percent on new product and 36 percent for secondhand wares.

Considering how well this appears to be working for the industry, we’re not sure when the gouging will dissipate. The semiconductor shortage, which has made an incredibly convenient excuse for shocking low production volumes, is now supposed to stretch out through 2022. But there are general supply issues that similarly need to be addressed and even the idyllic scenarios leave the North American market failing to manufacture anywhere near enough vehicles to meet pent-up demand.

Looking to get a square deal on an automobile this year? Perhaps it’s time to update your bartering tactics for 2022 and remember that it pays to have done your research in advance. Learn everything you can about the car in question and what it might be going for elsewhere. Now may also be the time to study up on where the salesperson and their immediate superior lives and does their shopping. Make it a point to bump into them as often as possible, reminding them about how intensely disappointed you would be if you thought you weren’t getting anything other than a fair deal. If that doesn’t seem to be working, try strengthening the relationship further by sending an unsigned and out-of-season Christmas or Halloween card addressed to literally everyone in their household! Surprise them back at the dealership later by asking if they received anything interesting in the mail recently and laughing heartily in fellowship before getting back to business.

If push comes to shove, make mention of what time they turn their lights off to go to bed and start listing off which schools their children go to. Then begin joking about how you might just take their car when they’re not paying attention. Sure, it might be perceived as a little too familiar by some. But you would be amazed by what can be accomplished by just talking with someone while constantly adjusting your waistband.

You could also simply hold off on buying a new vehicle — provided your present situation even allows for that — in the desperate hope that others will be following suit.

All kidding aside, that’s probably the only realistic option people have right now. Dealers currently aren’t taking the hint because consumers continue selling out the big bucks. If the market shows that the outer limits of vehicular pricing have been reached, odds are good prices will come back down through 2022. Though this assumes that production volumes have likewise returned to something approaching normality and the industry doesn’t respond like it did in 2008. For now, dealers are gearing up for suppressed output and even bigger profits by the end of 2022. It’s up to you to decide how far you want to bend over and take it, however.

[Image: Gretchen Gunda Enger/Shutterstock]

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37 Comments on “Auto Dealers Report 2021 Profits Will Break Previous Record...”


  • avatar
    thornmark

    if the stealerships are making that kind of profit then vehicle price inflation is much higher than reported

    • 0 avatar
      tomLU86

      It appears that the demand for vehicles in 2021 was rather inelastic.

      TTAC, Mr. Matt Posky, you are among the more astute, if not the most astute, TTAC writer. Can you please use TTAC’s journalistic resources to give us CY2022 sales figure, so that we, the commentariat, may discuss and debate if market share changes, if any, were due to solely to availability, or if some products were slugs..

      Does the industry still provide inventory days’ supply?

      Or do they only provide this data to their “preferred journalists”?

      Half a story, with half the facts, is not the story (that’s never been truer than now, just look around).

      Thank you

  • avatar
    SCE to AUX

    “If the market shows that the outer limits of vehicular pricing have been reached, odds are good prices will come back down through 2022.”

    They have not been reached. The market will continue paying big money, and the mfrs have no incentive to flood the market with inventory only to see profits drop.

    The auto industry has become a cartel, and will stay that way until new entrants can deliver lower prices. Contrary to my prior opinion, maybe this really is an opportunity for Chines mfrs to get a foothold in the US market.

    • 0 avatar
      thornmark

      BMW reportedly announced that they like it – so much so they intend to keep inventories very lean to keep prices high

    • 0 avatar
      JMII

      “The auto industry has become a cartel”

      For now… but only because all OEMs have the same problem, they are all in the same boat currently. However once one of them gets enough chips and cranks up the factory then what? Will all the other dominoes fall? I just read another article which mentioned how most car buyers purchase on impulse thus the order system has never worked well for dealers. Because if a dealer down the street has something that you can drive home today to impress the Jones’s the house of cards crumbles. The only way to maintain these high prices is if the cartel stays strong. I can’t see that happening. H/K already announced they plan to increase production this year and want to start making their own chips.

      • 0 avatar
        Jeff S

        That is precisely what will happen because H/K will crank up the production once they make their own chips. The Big 2 1/2 will maintain their lead in full size body on frame pickups and suvs but as those get more expensive buyers might decide to hold onto their existing trucks longer and others might decide they can live without a large truck if there are more plentiful and less expensive alternatives. The Chinese might decide to enter the US market with their own EVs and less expensive alternatives. Nothing lasts forever and that includes the ever increasing prices for vehicles. Doubt prices will come down by much but as more chips become available prices will stabilize as more vehicles are produced and most buyers are not going to want to wait months or years to get a new vehicle they have to order to get.

    • 0 avatar
      28-Cars-Later

      “The auto industry has become a cartel”

      I’m one to see things for what they are, but I don’t see the automotive industry as a cartel at least not yet. They are being starved of necessary components while simultaneously having the boot of the statist on their face. I suppose it possible in some cases certain models are being artificially held down or purposely exported to create artificial supply issues. When (and if) any appreciable supply of components is available I would expect production to expand.

      • 0 avatar
        SCE to AUX

        The mfrs will end up choosing between revenue or margin.

        At the moment, nearly all are enjoying great margins. It’ll be hard to give that up, but the reward is potentially greater market share *if* they increase volume.

        Tesla delivered record volume this past year, but delivery times greatly favor their most expensive configurations. As a result, I assume they will report greater margins as well. Other mfrs also seem to be offering only the priciest configs at new vehicle introductions.

        I don’t believe the mfrs are formally organized as a cartel, but I suspect that – given the choice – most of them would prefer to report greater margins than greater market share. That choice will badly hurt some of them later.

    • 0 avatar

      The other option is to switch to subscription model. You pay fee every month and never own a car or have hasslse with trading in old car and buying new one.

      Or make cars only on exact order from customer like it is done in Europe. Much more effective and lower carbon footprint.

  • avatar
    pmirp1

    In order to get my order in for my Tahoe RST, I had to pay market adjustment to my favorite Chevrolet dealer that I bought my Corvette from. I think this is just market dynamics. I have no problem with paying that. It is simply supply and demand and I shall support my local dealer to death. I hate people who go out of region or even more the direct to customer via internet buying channel like Tesla. Support your local people.

    • 0 avatar
      SaulTigh

      I’m afraid if my local guy wants a $5k market adjustment and a dealer across state lines will do the deal for sticker price with no market adjustment, the local guy can go to hell. It’s my money, and I worked hard for it, and it’s worth less every day.

      This is why I just went through a round of maintenance on all three of my vehicles. Ain’t in the market for one until this all simmers down.

      • 0 avatar
        Farhad

        I am all in paying extra to support my local bookstore or camera store, but the car dealer? I cannot think of a single reason to support them!

      • 0 avatar
        pmirp1

        SaulTigh, in the case of my daughter who I helped recently with a Tacoma, I can tell you out of state dealers are so capacity constrained(or allocation limited as they told us how Toyota gives vehicles) that going out of state won’t help. They were not willing to give their limited allocations to out of zip code customers.

        In general going out of state to save a few dollars doesn’t pay. Think of the relationship with local dealer that can help you long term.

        I have a 2016 Vette, bought new from current Chevy dealer. It has very few miles. Garage Queen. I have a service adviser and they treat me like a king when I go there as the relationship is golden. Try that with out of state dealer that you only see once. Then when you have problem with that ride you bought out of state, who fixes it? The local dealer who you have no relationship with.

        Sure some people go out of state (well at least they used to when there was supply and no Covid) in search of saving a few dollars. But so much can also go wrong in those transactions where you have not seen the ride, and they got you because well you drove all the way to purchase that vehicle out of state. Think twice before driving out of town when that same dealer can provide the same vehicle locally.

    • 0 avatar
      CKNSLS Sierra SLT

      pmirp1-

      I have NO PROBLEM supporting local business. But I will not pay an ADM of $5,000.00 to do so. If I need a $300.00 one-way plane ticket to fly a few states over that’s what I am doing.

      • 0 avatar
        pmirp1

        CKNSLS Sierra SLT, paying market adjustment is part of market dynamics. You may not want to pay it, or perhaps you have fresh enough rides currently that you don’t need to be in market for a new ride. If you want a new ride, you pretty much have no choice currently for at least popular vehicles.

    • 0 avatar
      ajla

      tinyurl.com/4xuau893

    • 0 avatar
      SCE to AUX

      Tesla stores employ ‘local people’.

      It’s just that the store sells the car for a fixed price. Since you don’t mind paying extra, you’ll be happy to know that Tesla’s prices have gone up quite a bit this year – market dynamics, etc., and lots of people were willing to pay.

    • 0 avatar
      Lou_BC

      “I shall support my local dealer”

      That’s a recipe to get sodomized each time you walk on the lot. In my town Ford, GM/Chevy, Stelantis, Nissan, Hyundai, Toyota, and Honda are owned by large chains. VW is a local guy. KIA is part of a small 3 dealer chain.

      I will support the best deal I can get. Period.

      • 0 avatar
        pmirp1

        SCE to AUX and Lou_BC, in Georgia there are four Tesla dealers. I can not count all of dealers in Georgia for various car companies.

        Even if Tesla had 100% market share, it is safe to say it won’t hire as many sales and support people as current batch of dealers. It is not just sales people, it is administrative folks in back office that do the work to get you a good financing deal with a bank and get your title and paper work done. It is the various support personnel that shine your new ride, or give you a valet ride home. It is the secretary that answer the phone at those dealerships. All those folks will go without a job.

        At the end, think of Amazon model vs. local store model.

        Lou BC and others, getting the best deal = wal-martization and Amazonization of America. You can not complain about junk from China flooding our countries, and say I will support best deal I can find. Period.

        While Tesla is certainly not junk, it flood the pockets of stockholders and Elon Musk with money, while the local stores go without same.

        • 0 avatar
          Jeff S

          At one time I would agree with supporting your local dealers but after having experience with dealers that were locally owned sell out to big mega dealerships with service going downhill I do not want to reward them by paying them a 5k or more market adjustment. The absolute greed will eventually kill the dealership model. True not all dealers are as greedy and not all give their customers the shaft but enough of them do to spoil it for everyone. As for everything becoming Amazoned and Walmartized there is still room for a dealership to stand above the rest and give outstanding service and get rewarded for doing so but gouging customers long term will cause customers to look for alternatives and for businesses to provide those alternatives.

          • 0 avatar
            pmirp1

            Jeff S, if you are in housing market, today homes go for more than asking price. It seems customers have no problem in many parts of the country paying for over asking price for a house, and get in bidding contests.

            On the other hand, you and many like you, think cars are in a category of their own. And dealer should not ask for more than MSRP. It is no different. Car is a commodity. If there is demand more than there is supply, price goes up. Economics 101. They are not gouging. They are responding to market dynamics.

            All dealers are the same. They are all trying to make a $. No different than any other company. Hey look at price of chicken and meat at your grocery store next time you are there. President Branden just had a meeting with farmers to talk about why prices have gone up (it is all his fault by the way). He is blaming a few suppliers as though before we did not have a few suppliers for chicken and meat.

            My point is it is inflationary and macroeconomics (and in the case of cars supply chain related). Don’t blame the dealers. Blame Branden and his policies.

        • 0 avatar
          Lou_BC

          @pmirp1 – I’m talking about vehicles. It is rare to find a dealer that’s a “mom and pop” operation. “A penny wise, and a pound foolish”.

          I seldom shop Walmart and prefer to frequent Canadian retailers. I don’t buy anything from Amazon. I do mail order motorcycle parts from Canadian suppliers.

  • avatar
    BSttac

    Scum of the earth

  • avatar
    ToolGuy

    “the average dealership made roughly $5,200 on every new car sold last month — which is more than triple what they were making over the same period in 2019”

    Questions:
    a) How good is the coffee again? (Is it 3X better than it was in 2019?)
    b) Do the manufacturers know how much the dealerships are making? (I certainly hope not – for the sake of the dealer model, which is super awesome)
    c) We know that dealerships are critical because they support kitten adoption. Could this function ever be performed by the manufacturers directly?

  • avatar
    cimarron typeR

    Support your local mechanics. Don’ buy anything (unless it’s a new manual trans. :) Want the latest tech? Visit your local car stereo shop like its 1992. They can retrofit to any car nowadays.
    We need our tradesman to earn a fair living,not the Penske auto conglomerati
    I was waiting for an oil change on our 07 Eos at my trusted vw/audi shop, they have been busier in the last 24 months than they have ever been.

  • avatar
    Master Baiter

    In a time of high inflation like we have now, it’s not news that anything measured in absolute dollars has set some sort of record.

    • 0 avatar
      pmirp1

      Exactly. The problem is the current resident of white house. The one term president wants to even add more fuel to highest inflation we have seen in decades by passing more than trillion dollar bills to give even more money to people to spend. How crazy is that? You can’t make this stuff up.

      I have my vehicles ceramic coated by a detailer I have known for years. When I was there this summer, he said business has never been as good as it is now, because people were getting paid by government and spending on detailing cars at his shop as they were telling him. He was out of the ceramic coating material he uses to maintain my vehicles and I had to wait for it to get there because of demand. Cause: President Branden.

  • avatar
    Jeff S

    Not going to pay above MSRP to a dealer that has a lousy service department. I don’t have to buy a new vehicle so I can wait as you said it is a capitalist economy and no one is forcing me to buy a new vehicle above MSRP. There are still some reputable dealers that do not charge above MSRP especially if you order, pay a deposit down, and get your order in writing. I ordered a new Maverick last July that way and it has a build date for the week of Feb 14. I will more than likely get service and parts at the dealer I ordered my Maverick from if they treat me right. I bought an S-10 from a Chevy dealership that once had a good service department but later when I paid for my repairs I had to take my S-10 back several times to get them to repair it right and once they didn’t tell me where they parked my truck after I paid the bill–I had to search the dealership lot and found it in the lot where the employees parked their cars (this was a large dealership with large lots). After a couple of bad experiences with this dealership I never went back especially since I spent thousands of my own dollars for service and repair. Went to an independent shop that repaired my truck right. Replacing a clutch and slave valve along with a brake job should be in the scope of a dealership especially a dealership where you bought that vehicle new from. Should I reward a dealership with a bad service department that does not stand by their own work by paying 5k above MSRP?

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