According to Chris Oakham, an analyst at the independent automotive consultant Trend Tracker, which compiled the latest Motor Trader Top 200, on average dealers are now achieving pre-tax profit as a percentage of sales of 0.85 per cent – only marginally better than the 0.8 per cent managed in 1993.

In addition, more than 10 per cent of companies in the Top 200 posted pre-tax losses in their latest available accounts. Oakham pointed out that while there was little difference in profitability levels across the 15 year divide, current figures are based on the buoyant trading years of 2006 and 2007 while 1993 figures were drawn from the depressed market of 1991 and 1992. “Many companies in 1993 were in a stronger position,” said Oakham He said in the 1993 Top 200 19 per cent of companies were either loss making or breaking even whereas today it was 21 per cent. In a downturn Oakham said the “best refuge (for dealers) is strong aftersales and used sales”. “The key to aftersales is to sell servicing and repair to customers you sold used cars to.” He said overhead absorption at the top performing 10 per cent of dealers meant new sales were “the icing on the cake” rather than crucial in covering costs. Oakham pointed to Lookers as a group well equipped to prosper in the prevailing conditions.

“Lookers is in a good position,” he said, “it has a great aftersales proposition with FPS and a solid used car operation.” The consolidation that has taken place in the franchised sector can be seen by the fact that in 1993 the Top 200 covered 2,234 franchises out of 7,409 in the UK (30 per cent) whereas today it covers 2,939 out of 5,273 (56 per cent). Total turnover of the Top 200 has risen from £16.9bn to £42.4bn and sales of both new and used cars now easily exceed 1 million a year. The economic downturn resulted in a lack of major takeover activity in the motor retail sector during the last year. The City adopted a more cautious approach and lost its appetite for funding the large scale consolidation drives that resulted in Pendragon's 2006 purchase of Reg Vardy and its failed subsequent bid to snap up another top five rival – Lookers. Robert Forrester, the chief executive of Vertu Motors which was established in November 2006, admitted it would have been impossible in the current economic climate to raise the funds that enabled it to buy Bristol Street Motors in March 2007. It was the failure of large groups such as Caledonia, which was carved up by Cambria, Nidd Vale and Chorley Nissan, and Dixon Motors, which Pendragon bought from its administrator, that prompted the main changes of ownership in 2007. Additionally, Lookers took the chance to swoop on the under performing Dutton Forshaw business. CLICK HERE or use the link in the top right of the page to download your free copy.