WASHINGTON -- The average dealer's net profit before taxes nearly doubled in the first five months of the year over last year, to $278,814, the National Automobile Dealers Association said today.

The average net pretax profit margin was 2.3 percent, up from 1.3 percent in May last year.

Net margins above 2 percent have been rare over the past 30 years, NADA records show.

NADA attributed the strong results to healthy sales increases in new- and used-vehicle departments, higher new- and used-vehicle profit margins, radically reduced vehicle inventory and low interest rates.

“All key financial numbers are up year to date,” said Paul Taylor, NADA's chief economist. “The retail automotive market is getting better slowly but surely this year.”

The biggest savings came in inventory financing. With production cuts and lower interest rates, floorplan interest cost per vehicle dropped 117 percent. In May, the average dealership had a $23 credit balance per vehicle in its floorplan account. That means the financial assistance that factories pay dealers to order new vehicles more than offset the dealers' interest expense per vehicle.

“Low interest rates are keeping inventory costs low this year, but some popular trucks and cars are in short supply because of production cutbacks and factory closings,” said Taylor.

New vehicle sales rebound

Through May, the average dealer also saw a 26 percent jump in new-vehicle sales revenue and a 24 percent increase in used-vehicle sales revenue from the same period last year.

Dealers grossed $1,371 per new vehicle sold, up from $1,183 last year, and $2,269 per used vehicle sold, up from $1,590 last year.

“Used-car prices remain elevated, helping new-car sales by increasing trade-in equity and by narrowing the gap in price between new cars and a 1- or 2-year-old car of the same description,” Taylor said.

Dealer ranks thin

NADA also released its 2010 “NADA Data,” the association's state-of-the-industry report for last year.

“In 2009, dealership data painted a mixed picture, as gasoline prices were favorable and sales fell further, but used-car profits returned after net negative used-car prices in 2008,” Taylor said. The used-car net losses resulted from volatile fuel prices, which caused dealers to have “the wrong new cars and used cars” in summer and fall, he said.

The report also underscores the affect that the weak U.S. economy and depressed consumer spending had on dealerships. The new-vehicle department at many stores has been in the ditch for a while -- failing to break even for the past four years. The used-vehicle department was profitable last year but in 2008 was in the red for the first time in history, as dealers tried unsuccessfully to keep up with changes in consumer demand, NADA said.

NADA said there were 18,458 new car dealers in the United States at the start of 2010, down 1,550 from 2009. It expects the number of U.S. dealers to drop further in 2010 by an estimated 500.