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Fitch Says Auto Dealer Profits Appear To Have Peaked, Incentives Pressuring Margins

Fitch Says Auto Dealer Profits May Have Peaked, Incentives Pressuring Margins|NYSE:FNYSE:FCAUNYSE:GMNYSE:HMCNYSE:TM

The best of times may have passed for U.S. auto dealers, according to a new report from Fitch Ratings.

U.S. auto sales hit a record in 2015 and were on track to improve and break its record in the first half of 2016. The trend has since reversed. Vehicle sales are likely past their peak and dealer profit margins are slipping.

Auto sales and profit margins have fallen in 2016 due to a combination of higher cash incentives and zero percent financing to entice consumers into showrooms. Incentives have increased each month since early 2015; the figure hit $3,900 per vehicle in September.

"These sales tactics will continue to eat into dealer profits and push down used vehicle values into 2017," Fitch Ratings said. "However, dealer profits remain healthy at a lower level, while overall dealer costs, including capital financing costs, stay low."

Car Manufacturer Performance Year-To-Date

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