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Car Dealership Profitability Down 25 Percent, Says Edmunds.com

October 7, 2008

Car sales may be down more than 20 percent, but suffering even more these days is dealer profitability, according to Edmunds’ AutoObserver.com.

There are over 20,000 car dealerships in this country. They employ over one million people, they make up approximately 18% of total retail sales and they deliver hundreds of millions of tax dollars to state and local governments each year, according to the National Auto Dealer Association (based on figures collected in 2007.)

What effect has the economic crisis caused for car dealerships?

· Based on comparisons of total gross profits from new vehicle sales this year and in 2007, Edmunds.com concluded that 25 percent of gross dealer profits were lost.

· Thirty percent of dealers dropped from more than 55 monthly new sales in 2007 to fewer than 55 this year, according to Edmunds.com’s analysis.

· Of the 70 percent of dealers who saw a drop in total gross margin this year, 28 percent lost more than half of their gross margin, determined Edmunds.com.

"The Big Three U.S. automakers have been trying to get rid of their weakest dealers for years, but the weeding-out process has gone far, far more slowly than automaker executives have wanted. Now, this year's double-whammy of economic shocks – explosive gasoline prices that stunned consumers, followed by the current financial crisis that is constricting credit at every level – has already begun culling out U.S. car dealerships at a rate far faster than General Motors, Ford and Chrysler brain trusts could even dream was possible by their methods," reported Dale Buss for Edmunds’ AutoObserver.com.

"Not everyone suffers when the chips are down," stated Jeremy Anwyl, CEO of Edmunds Inc. "Good dealers will thrive as shoppers become ever more careful about where they spend their money."

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