Things Are Getting Much Better For Car Dealers

DETROIT (WWJ) - While car and truck sales slowly recover, 2012 is shaping up as a record year for car dealers.

A new report from the dealer consulting group Urban Science says the average dealer is on a pace to sell 785 cars this year. That would be a new record.

"The dealer body has kind of right sized, it's stabilized," said Urban Science vice president John Frith. "We actually saw a little bit of an increase this year, which is unusual. The sales increase, and that stable dealer body has allowed the dealers to sell more vehicles per dealership."

The industry added 100 dealerships in 2011. Frith says the addition of Fiat, and the growth of combined Chrysler-Dodge-Jeep-Ram dealerships offset the loss of Mercury dealerships.

That meant a net rise of four dealerships in Michigan.

"The Michigan count rose at exactly the same rate as the nation, about six tenths of a percent," said Frith.

2011 was one of only two years on record to see an increase in the number of dealerships. Frith says the trend has generally been a decline of about two per cent a year. That decline was more pronounced during the recession years of 2008 and 2009.

Dealers are seeing a lot of new opportunities in leads gathered via the Internet. Urban Science says the number of online leads could grow ten to fifteen per cent this year.

Much of that growth will come from third party web sites, like Edmunds.com, Cars.com, and KBB.com.

"This is not a new phenomenon," said Jody Stidham, a global practice director at Urban Science. "I think what's occurring is that as retail sales increase and consumers want more choices, as they narrow their decisions in the purchase funnel, the third party sites afford consumers the ability to cross shop."

That increases competition, Stidham says, meaning dealers have to not only respond quickly to online leads, but they have to respond with the specific information consumers seek.

"Last year's theme was beat the clock," she said. "All dealers were being pressured to respond quickly to leads. This year the theme is respond quickly, but with a quality message."

Stidham says thirty percent of dealers don't give buyers specific quotes online. She says that could be costing them business.

As dealers sell more vehicles, this will mean new hiring. Neither Stidham, nor Urban Science VP John Frith could say how many new jobs would be added.

The recession has forced dealers into finding ways to save money. Frith says they can't forget those lessons as the economy gets better.

"The survivors have put financial policies and procedures in place so they can make money at a lower sales volume. The trick is not getting complacent."

Connect with Jeff Gilbert
Email: jdgilbert@cbs.com
Facebook: facebook.com/carchronicles
Twitter: @jefferygilbert