Dealers spend 22% of pre-tax net profits on regulatory compliance

Dealers spend 22% of pre-tax net profits on regulatory compliance

You knew you spent a lot of staff time and dealership money complying with federal regulations, but now NADA has quantified it. In 2012, the average dealership spent $182,754 in federal regulatory compliance costs. That comes to 21.7 percent of the average dealershipês 2012 before-tax net profits, nearly $2,400 per employee. The study, commissioned by NADA, was conducted by the Center for Automotive Research.

Most of the costs are for regulations on employment, accounting and vehicle financing. The rest cover business operations, sales, marketing and vehicle repair and maintenance. The 60 federal regulations the study looked at are –a mere subset of the full catalogue of federal regulations with which light vehicle dealerships must comply,” the report says.

The $3.2 billion that dealers spent on regulatory compliance in 2012 was passed on to consumers in the form of higher prices. –The overall impact on the U.S. economy including direct, indirect, and expenditure-induced effects is estimated at $10.5 billion in lost economic output and more than 75,000 fewer jobs in 2012,” says the report.

The cost estimates were based on information from eight dealerships, one in Maryland and the rest in Michigan and Ohio. The dealerships were not named.

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