CLEVELAND -

KeyBanc Capital Markets indicated that the majority of principals and managers who participated in its March dealer survey said used-vehicle gross margins “remained under pressure.”

By how much are those grosses being pinched? Well, 57 percent of respondents told KeyBanc that grosses stayed flat or dropped by more than $50 per unit in March. When considering the entire first quarter, the percentage of dealers who said grosses either remained flat or declined by more than $50 was even higher. KeyBanc reported the survey sentiment at 65 percent.

“F&I (gross profit per unit) remains strong and continues to partially offset new- and used-vehicle (gross profit per unit) decline, and resulting front-end (gross profit per unit) is relatively intact,” KeyBanc noted in its latest survey report. 

Meanwhile, dealers told KeyBanc that used-vehicle sales volume remains strong as 71 percent of participating stores mentioned an increase in March. An ever higher penetration of respondents (86 percent) posted used-sales rises for Q1.

Switching to new-model activity, dealers conveyed that grosses are “under pressure” when turning new metal, too. A total of 71 percent of respondents experienced a new-vehicle gross dip of more than $50.

“We remain confident new-vehicle (gross profit per unit) pressures are largely driven by the mismatch of supply versus demand of cars vs trucks/SUVs as consumers have shifted their preference to trucks/SUVs following a decline in gas prices a year ago,” KeyBanc analysts said.

“We expect new-vehicle (gross profit per unit) will improve in the second half of the year as passenger car production is expected to decline,” they added.

KeyBanc elaborated about its reasons why for a projected improvement. Analysts pointed to the devastating series of earthquakes that led to what is anticipated to be a one-week shutdown of production at Toyota in Japan. The firm mentioned that could impact as many as 56,000 units of output based on early reports.

KeyBanc also mentioned the decision by Fiat Chrysler Automobiles to shut down production of the “slow selling” Chrysler 200.

“Tighter passenger car supply combined with a previously planned increase in light trucks for 2016 should help align the light vehicle supply mix with the demand mix, which we expect will lead to an increase in new vehicle (gross profit per unit),” analysts said.

KeyBanc closed with one other points about the new-vehicle market; this time about sales volume which analysts said ticked up by 3 percent in the first quarter.

“We believe lower than anticipated reported March new-vehicle volumes were a result of the Easter holiday timing. For the first time in several years Easter fell into March, which is not a holiday when consumers shop for large items, and it therefore took a weekend of sales out of March results,” KeyBanc analysts said.

“We are confident April volume will show a year-over-year jump as April will not have the Easter impact it had last year and has one extra calendar weekend relative to last year,” they went on to say.