Auto Dealerships

The 16,596 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.

Dependence on Financing

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

High Employee Attrition

Employee turnover remains a persistent challenge for new car dealerships, particularly among sales staff.

Nov 5, 2026 - Demand for Cheaper Cars Outpaces Supply

• Affordability concerns are sending car buyers scrambling for lower-priced vehicles, but new car dealers aren't always able to meet the demand. Vehicles priced between $20,000 and $29,999 sold 20% faster in the third quarter than in the first, according to Edmunds, while those priced between $30,000 and $39,999 moved 18% faster. Despite the brisk pace, sales of compact cars and compact SUVs have declined this year, suggesting that limited inventory is holding back purchases. Automakers have spent years abandoning inexpensive sedans in favor of higher-priced SUVs and crossovers, leaving fewer options for budget-conscious shoppers. The average new vehicle listing price reached $49,726 in September, according to Cox Automotive. Meanwhile, roughly one in four buyers financing vehicles are taking out 84-month loans, highlighting the lengths consumers are going to afford a new car.
• New car buyers are taking on longer loans with bigger monthly payments as high vehicle prices and borrowing costs push affordability further out of reach. According to Edmunds, a record 25.5% of financed new vehicle purchases carried loan terms of 84 months or longer in the third quarter of 2026, up from 21.8% a year earlier. Despite those longer terms, the average monthly payment hit a record $787, while the average amount financed climbed to $44,664. More than one in five buyers now face payments of at least $1,000 a month. The financial squeeze could make it harder for dealerships to close sales as consumers struggle to fit new vehicles into their budgets. Longer loans also mean buyers build equity more slowly, creating obstacles when trading in their vehicles. Nearly 30% of new car trade-ins carried negative equity in the second quarter, according to Edmunds.
• New electric vehicle (EV) sales have struggled to regain momentum since the Trump administration eliminated federal EV tax credits in September 2025, leaving auto dealers with a tougher sales environment. According to the National Automobile Dealers Association (NADA), battery-electric vehicle sales fell 29.2% through September 2026 compared with a year earlier, while their share of the new-vehicle market slipped to 6.2%. Sales surged before the credits expired as consumers rushed to claim incentives worth up to $7,500, but demand weakened sharply afterward. Dealers now face greater pressure to offer discounts and manufacturer incentives to move EV inventory, particularly as affordability concerns continue to discourage buyers. Meanwhile, conventional hybrids have emerged as a bright spot for dealerships. NADA reports that hybrid sales jumped 22.4% through September, suggesting many consumers still want better fuel economy without the higher upfront costs or charging concerns associated with fully electric vehicles.
• 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.

Industry size & Structure

A typical car dealership employs around 68 people and has total annual revenue of over $72 million.

• There are about 16,596 car dealer firms in the US with 1.1 million employees and total annual sales of over $1.1 trillion.
• The average price of a new vehicle is more than $50,000.
• Franchised dealers hold approximately 2.58 million new vehicles in inventory, including 2.1 million domestic vehicles and 479,000 imports, according to the National Automobile Dealers Association. The average inventory supply was 47 days for domestic vehicles and 41 days for imports.
• Popular brands include GM (17% of total new car sales), Toyota (15%), Ford (13%), Hyundai (11%), Honda (8%), and Stellantis (7%).
• The largest auto dealership groups in the US include AutoNation, Lithia Motors, Penske Automotive, and Sonic Automotive.