Friday, 19 November 2021 09:42

Dealership Profits Breaking Records During Car Shortage

Written by Sean Tucker, Kelley Blue Book


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America’s car dealers have spent most of 2021 struggling to find enough cars to sell. But they’re not hurting. They’re shattering profitability records.

According to a report from the National Automobile Dealers Association (NADA), net profit before tax at the average new car dealership through the first nine months of 2021 was up an astonishing 128.2% over the same period in 2020. Net profit includes both operating profit and the incentives some automakers pay to dealers who exceed sales targets.


Dealerships selling domestic cars saw their pre-tax net profit rise 112.6%, NADA said. Those selling imported cars saw an even greater increase, 140.6%.


Microchip Shortage Leads to New Car Shortage


Prices for both new and used cars have soared throughout 2021.


A worldwide shortage of microchips and other supply chain struggles have forced automakers to cut the number of cars they produce. Virtually every automaker has idled factories at some point in 2021 because of a shortage of necessary parts.


Most have used the microchips they can get to produce high-margin SUVs and pickup trucks. Forced to cut something, they’ve built fewer affordable small cars.


Meanwhile, Americans, enjoying an economic recovery from the worst days of the COVID-19 pandemic, have gone back to car shopping.


The result? In October, the average new car in America sold for $46,036---an increase of...

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