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.

Jul 31, 2026 - New Car Affordability Squeeze Challenges Dealership Sales

• New vehicle affordability remains one of the biggest challenges facing auto dealerships. Although inventories have largely recovered from the pandemic shortages, high prices and elevated borrowing costs continue to keep many buyers on the sidelines. Cox Automotive estimates the average new vehicle sold for roughly $48,800 in June 2026, while average interest rates on new-car loans remain around 7%, leaving monthly payments near record highs for many consumers. As a result, shoppers are taking longer to replace their vehicles, choosing less expensive models, or moving into the used car market instead. Dealers are responding with larger incentives, promotional financing, and greater discounting than they offered a year ago, but those efforts are also putting pressure on new vehicle profit margins after several years of unusually strong earnings.
• 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.
• Despite a recent Federal Trade Commission (FTC) crackdown on deceptive auto pricing, hidden fees remain common at car dealerships. Consumer advocacy firms found that many advertised vehicle prices exclude discretionary charges such as documentation fees, warranty packages, certification costs, paint protection, and other add-ons, leaving buyers to discover thousands of dollars in extra costs during the sales process. The FTC has warned dealers that advertised prices should include all mandatory fees except taxes and registration and is preparing to step up enforcement after an adjustment period. A recent settlement requiring Lindsay Automotive Group to pay up to $75 million in consumer restitution and additional penalties underscored the financial risks of noncompliance. While dealer groups say transparency is improving, industry participants note that online marketplaces often reward the lowest advertised prices, creating incentives for some dealers to continue using pricing tactics that make vehicles appear cheaper than they actually are.

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.