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New-, used-vehicle margins gap widest in 25 years: NADA datavehicle

November 22, 2010
The gap between per-vehicle profits on new and used vehicles is the greatest it has been in at least 25 years, according to data of the National Automobile Dealers Association.

One result: Some franchised dealers are putting more emphasis on selling used cars than on selling their automakers' new vehicles.

From January through August 2007, used vehicles averaged a net retail profit of $306 each, while new vehicles averaged a net retail loss of $17. The NADA data included new-car dealerships of all brands.

The profit gap is the widest since 1982, the first year for which the NADA supplied figures. Last year, the typical dealership netted $223 on the average used vehicle and lost $31 on the average new vehicle.

"It's an unfortunate fact of life," says Paul Taylor, the NADA's chief economist. "Used cars are more important in recent years. The sales effort is up."

Taylor said he expects the typical dealer will suffer a net loss on new-vehicle unit sales for the year, although he did not project a precise figure.

The subprime mortgage crisis and its effect on home values have lowered profits on the sale of new cars and trucks, Taylor said.

 
 

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