Car dealerships are positive about what is in store for the rest of 2016

Oliver Gill
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Cars have historically been a discretionary purchase that acts as a barometer for public economic confidence (Source: Getty)

Two-thirds of car dealerships said they expected to either stabilise or grow profits during the rest of 2016 despite the "uncertainty" created by the Brexit vote.

Every salesperson likes to be confident about meeting their targets, but the survey prepared by accountants MacIntyre Hudson also indicated that 53 per cent of dealers expected to hit sales targets.

The sector enjoyed a bumper first five months to the year but dipped in June on the run-up and after the EU referendum. A decline in June – according to data from the Society of Motor Manufacturers and Traders (SMMT) – was followed by a small increase (of 0.1 per cent) in July.

“The MHA Motor Dealer Report 2016 shows that the sector is very positive and optimistic about the next 12 months. However, the recent Brexit vote has thrown an element of uncertainty into the mix. But on the whole, it hasn’t dented optimism and we look forward to continued growth in the industry for the rest of this year and beyond," said Steve Freeman of MHA MacIntyre Hudson.

Read more: New car sales to drop 20 per cent in Brexit recession, analyst says

The survey revealed that personal contract purchases (PCPs) were a strong contributor to new car purchases. Over half of the dealers said that 70 per cent or more of their new car sales were funded through PCPs.

PCPs are similar to a hire-purchase agreement but differ in that repayments fund only the depreciation of the vehicle and not its entire value.

"The report indicates the importance of finance to the sale of vehicles and dealers’ profit earnings. We believe that this trend will continue as PCP continues to replace traditional Hire Purchase for consumers," said Sue Robinson of National Franchised Dealers Association.

The third highest cost increase – after rises in wages and staff recruitment – related to financial compliance requirements.

"Finance commission is an important contributor to the vehicle margin, although only 18 per cent said it made up 50 per cent or more of the total margin. Recent FCA changes appear not to have affected finance commission incomes, although the cost of complying with the new rules is a significant concern for dealers," said Robinson.

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