Auto Dealerships

The 39,994 new car dealerships in the US typically manage five distinct departments: New Vehicle Sales, Used Vehicle Sales, Finance and Insurance (F&I), Parts, and Service. One-third of all US new car dealerships also offer collision and body shop services. Used car sales, financing, and parts and repairs tend to be more profitable divisions for dealers.

Low Profitability

Customers are increasingly savvy about the true price of a vehicle, using the Internet as a tool to find the best price and to sniff out extraneous up-sells.

Dependence on Financing

Dealers purchase vehicles at the time of acquisition, not when a car is sold to a customer.

Sep 9, 2026 - New Car Affordability Squeezes Dealership Sales

• Affordable new cars are disappearing from dealership lots, narrowing the market for buyers who can’t stretch to today’s higher prices. According to Edmunds data, just 4% of US new vehicle sales were below $25,000 in the first half of 2026, while another 10% fell between $25,000 and $30,000. A decade ago, most new vehicles sold for less than $30,000. Automakers have steadily dropped inexpensive models in favor of higher-margin trucks and SUVs, while inflation, tariffs, and added technology have pushed costs higher. New vehicle prices have climbed 49% since 2015, outpacing overall inflation. The shrinking entry-level market could mean fewer potential buyers for car dealers: Edmunds estimates high prices may be keeping roughly 1 million consumers out of the new car market, helping hold annual sales below the 17 million vehicles the industry routinely reached in stronger years.
• Car dealers face another affordability headache as the US trade fight with Canada spills deeper into the auto industry. The administration is threatening 50% tariffs on Canadian cars, trucks, auto parts, and steel beginning January 2027, potentially raising costs on vehicles assembled on both sides of the border. Just as challenging is the uncertainty surrounding the policy itself. Tariffs have been announced, delayed, revised, and threatened again, making it difficult for automakers to set production and pricing plans and leaving dealers unsure what vehicles will cost by the time they reach the lot. Canada is also retaliating against US goods and vehicles, raising the stakes for an industry built around a tightly connected North American supply chain. Dealers ultimately have little control over those added costs, which could mean higher sticker prices, fewer incentives, tighter margins, or another reason for price-sensitive shoppers to delay buying a new vehicle.
• After several years of record profitability, new-car margins at US dealerships have largely returned to pre-pandemic levels as vehicle inventories recover and manufacturers once again rely on rebates, low-interest financing, and other incentives to stimulate demand. The National Automobile Dealers Association estimates the average gross profit on a new vehicle is only about 3.9% of the selling price before overhead, leaving dealers with relatively little room for profit once labor, advertising, floorplan financing, and facility costs are considered. At the same time, elevated vehicle prices and interest rates have made consumers more price-sensitive, forcing dealers to compete more aggressively on price, while rising inventory carrying costs further pressure profitability. As a result, dealerships are increasingly relying on higher-margin revenue from finance and insurance products, used vehicles, and especially parts and service operations to offset shrinking profits on new-car sales.
• Dealership service departments are losing routine maintenance business as price-conscious consumers increasingly choose lower-cost repair chains and independent shops. According to market researcher Ducker Carlisle, dealership service transactions fell 13% between January 2025 and January 2026, the steepest decline in an industry where overall service transactions dropped 11%. Automotive News reports that dealerships now charge an average of $521 per service visit, nearly double the $271 average at repair chains, after raising prices faster than other segments of the aftermarket. While dealerships continue to earn strong marks for complex repairs and first-time fix rates, many drivers, particularly younger owners, are opting for quick lube centers, tire chains, and independent shops for routine maintenance because they view them as faster and significantly less expensive. The trend is prompting dealerships to rethink service pricing and customer retention strategies as competition intensifies.

Industry size & Structure

A typical car dealership employs around 30 people and has total annual revenue of over $30 million.

• There are about 39,940 car dealerships in the US with 1.2 million employees and total annual sales of over $1.2 trillion.
• The average new car dealership sells just about 930 vehicles per year. The average price of a new vehicle is about $48,840, a figure that generally has tracked closely with inflation but has accelerated with from the pandemic and tariffs.
• Franchised dealers hold around 2.8 million vehicles in inventory, with about 540,000 of those vehicles being imports. A typical dealer has a 50-day supply of domestic vehicles in inventory and a 40-day supply of imports.
• Popular brands include GM (17% of total new car sales), Toyota (14.7%), Ford (12.7%), Hyundai (10.8%), Honda (9%), and Stellantis (8.1%).
• The largest auto dealership groups in the US include AutoNation, Lithia Motors, Penske Automotive, and Sonic Automotive.