Profit, it’s the most important word when it comes to running a business. For new and used car dealerships in the UAE, it is so important to know and understand the average profit margins for different automotive services. That brings us to the question, what are the profit margins for car dealerships in the UAE?
EasyCars has put together the complete guide that will outline the average profit margins for all automotive services in the uAE and how your dealership can achieve them.
Let’s break it down.
Understanding Profit Margins for Car Dealerships
Before we start to look into the different profit margins in the UAE it is important to understand what a profit margin is. A profit margin in the UAE is the percentage of revenue that your dealership has after all your expenses have been removed. For example, it’s the remaining number after your car showroom in the UAE has paid staff, rent, and all other overheads.
It is important to note that profit margins in the UAE can vary based on several factors like the types of cars the car showroom is selling and where they operate.
Average Profit Margins for Car Dealerships in the UAE
New Cars vs. Used Cars
- New Cars: Profit margins on new cars for sale in the UAE are generally lower when compared to used car showrooms due to the enforced manufacture pricing and high competition. In the UAE, the average profit margin when selling new cars to customers is between 5-8% depending on the type of car that you are selling and what the agreement is with the manufacturer. However, high-end luxury cars are found to provide better margins for new car dealers in Dubai. Dealers selling cars like Mercedes have found to generate profit margins of 10%.
- Used Cars: In the UAE, profit margins are greater when selling used cars over new cars. The average profit margin for selling used cars in the UAE is between 10-15%. The main reason why dealers can generate greater profit margins on used than new cars is they can control price points and acquisition costs.
Factors That Impact Profit Margins
Profit margins can and often do change drastically for many different reasons. It is important to know the different reasons for fluctuating profit margins when operating a car dealership in the UAE. Here are the main factors that impact profit in the UAE:
Operating Expenses
It is expensive to run a car dealership in the UAE. Think about it, you need to pay for location rent, utilities like electricity and internet connection, staff, marketing and more, all of which will eat into potential profit margins. To increase profit margins at your car dealership it is important to try to keep operating expenses as low as possible.
Inventory Management
The way that your car dealership in the UAE manages inventory will have a significant impact on profitability. The longer that cars sit at your dealership, the more it will cost your dealership money. The key to having a strong 10-15% profit margin in the UAE is to source cars at a low cost and move them quickly. The best way to do this is by diversifying the cars that your showroom sells.
Strategies to Maximize Profit Margins
Now that we understand the average profit margins for car dealerships and what impacts profitability we now are faced with the question, how can car dealers increase their profit margin? Here are a few proven strategies.
Competitive Pricing
The UAE automotive industry is extremely competitive, the first way to increase your profit margin is by offering the most competitive prices in the market. Buyers are price conscious, they will search online for the best deal. Be sure to closely monitor market trends and your competitors pricing and adjust your own so that it is better than what they can offer. The more competitive your offers are, the more customers you will confer, it’s that simple!
Diversify Vehicle Offerings
A mistake that so many dealerships around the world make is stocking one type of car. No two car buyers are the same, what one Emirati will want will differ to the next. TO increase your car dealership in Dubai’s chance of profitability it is important that you diversify your vehicle offerings. Be sure to stock a wide range of cars for sale like SUVs, Luxury Cars, 4x4 Utes, Hybrid Cars and even Electric Cars.
Financing
One of the key ways that many dealerships around the UAE boost their profit margins is by offering customers financing options when purchasing the car. By partnering with different banks or financing providers, dealers can take a percentage and a commission of earnings when they close a finance deal. Commissions from Dealer Finance can add an extra 2-5% to the overall profit margin per sale.
Focus on After-Sales Services
Another proven way of boosting profit margins in the UAE automotive industry is offering after sales services like maintenance, repair and warranty. By offering tailored after sales services your dealership can continue to drive revenue from existing customers after the time of a car sale. Like car finance above, by offering options like warranty your dealership can add another 2-5% in profit per deal.
Final Word,
Increasing profit margins is the most important part of running any business. By understanding the different factors that impact profit margins in the UAE and how to achieve profitability your dealership will set itself up for long term success. The margins presented in this piece are found to be the average profit margin for car dealership currently. It is important to note that these numbers can vary based on a culmination of factors like location, operating costs and more.
We hope you enjoyed reading this article. To read more articles like this, please visit the EasyCars latest news page here.
DISCLAIMER – The content within this blog does not constitute professional advice and is intended to be general in nature. Please consult with all relevant parties prior to making any decision.
About EasyCars,
EasyCars by Jeal is a UAE Motor Industry Specific, Dealer Management Software that automates the daily tasks of running a motor dealership. Using the latest technologies, EasyCars removes frustrations experienced at the dealership - opening the doors to future growth.
EasyCars features include Simple Stock Management, Automated Advertising, Automatic VAT Calculations, Xero Accounting Integration, Facebook Automotive Inventory Ads, Dealer Websites and Business Reporting in the one central management software.
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