The success of a dealership depends on many factors. These range from sales to state-specific factors such as business climate, fees, surety-bond amounts and more.
A common indicators of state dealership-friendliness is average annual sales per store. This is only one metric, though it immediately speaks to profitability.
This is also the main metric I’ve used in creating this year’s list of the best states to open a dealership in. The information is derived from the National Automobile Dealers Assn. It provides a yearly overview of auto retailing and its trends.
For context and to create a more balanced picture, I’ve included other information derived from different lists.
Here are the top five:
It once again tops the list. NADA’s report says average sales per dealership in the state have jumped to $183.9 million from last year’s $168 million. The report does note that the figure is skewed due to a greater amount of fleet registrations, yet it is nevertheless impressive.
Average payrolls and weekly earnings of employees at the state’s new-car dealerships are lower than the average for the U.S.
According to two lists of the best states for business, by Forbes and the Tax Foundation, Oklahoma ranks No. 24 and 26 respectively. These lists take into account factors such as business costs, taxes and growth prospects.
Up one place from last year, Arizona had an average of $94.6 million in sales per dealership in 2018.
Weekly earnings of employees are $1,151, slightly higher than the national average. Payroll costs have increased to $6.02 million, roughly $2 million more than the national average.
While the surety bond amount remains high for dealers in the state ($100,000), business conditions are altogether favorable. Forbes lists Arizona as No. 17, the Tax Foundation ranks it No. 27.
The Sunshine state also remains high on the list, with an average of $92,4 million in sales per dealership, up from last year. Florida has the third-highest number of vehicle registrations in the country.
Average weekly employee earnings are close to the national average: $1,160, and payroll costs are at a solid median of $5.69 million.
Licensing and bonding amounts for dealers in Florida have remained unchanged during the preceding year. According to Forbes, Florida is at No. 7 among the best states for business. The Tax Foundation ranks it No. 4.
Average per-dealership sales have increased to $90.8 million, about a million more than last year. California is the state with the greatest number of new vehicle registrations in the nation. It has the highest number of new vehicle dealerships in 2018: 1,323. It boasts the highest amount of total dealership sales in the U.S.: $120.1 billion.
California has $6.07 million in dealership payroll, the second highest in the country. California is notorious for its corporate and other business taxes, which is why Forbes ranks it No. 29 and the Tax Foundation No. 49.
Similarly, license fees for dealers are higher than the average, even though the bond amount of $50,000 is not exceptionally high.
It has an average of $89 million in annual sales per dealership. Payroll costs are $6.23 million, making it the highest of all states. Employee average weekly earnings are $1,289, also higher than the national average of $1,134.
While Nevada’s average sales are quite high, compared with the rest of the country, the state had only 98 new-car dealerships last year.
The total amount of light-vehicle sales was $8.7 billion, significantly lower than that of many other states not on this list. On the other hand, in terms of general business conditions, Forbes ranks Nevada No. 21 and the Tax Foundation lists it at No.9.
What do you think? Are these the best states to open a dealership in? Would you include any other state instead? (Wards Industry Voices contributor Todd Bryant, left)
Todd Bryant is president and founder of Bryant Surety Bonds.