Auto Dealerships

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 17,000 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.

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.

Industry size & Structure

A typical new car dealership employs around 50 people and has total annual revenue of over $52 million.

    • There are about 17,000 new car dealerships in the US with total annual sales of over $1.1 trillion.
    • The average new car dealership sells just over 1,000 vehicles per year. The average price of a new vehicle is about $48,500, a figure that generally has tracked closely with inflation over the past decade but accelerated during the pandemic.
    • Traditionally, franchised dealers held around 2 million domestic vehicles in inventory and 1.7-1.9 million imports. A typical dealer had a 65-75-day supply of domestic vehicles in inventory and a 50-55-day of imports. Post-pandemic, franchise dealers are holding some 1.4 million domestic vehicles and about 260,000 imports. Now, a typical dealer has a 38-day supply of domestic vehicles in inventory and a 27-day of imports.
    • Popular brands include GM (16.4% of total new car sales), Toyota (15.4%), Ford (13.1%), Stellantis (Fiat Chrysler, PSA Group – 11.2%), and Honda (7.2%).
    • The largest auto dealership groups in the US include AutoNation, Lithia Motors, Penske Automotive, and Sonic Automotive.
                                Industry Forecast
                                Auto Dealerships Industry Growth
                                Source: Vertical IQ and Inforum

                                Recent Developments

                                Feb 13, 2024 - Producer Prices Down, Employment Costs Up
                                • Industry wages have risen over 20% from 2019 to 2023 as car dealers boosted wages to remain competitive in a tight labor market, according to the BLS. Wages ranged between $27-$29 an hour in 2023. Employment levels for the industry have yet to reach pre-pandemic era levels, declining 2% from November 2019 to November 2023, per BLS data. Employment levels have been making gains following a 6.5% decline in 2020 during the early pandemic. Producer prices were the lowest in the fourth quarter of the year, declining each quarter of 2023, per BLS data. Consumer spending levels grew in the last half of 2023, with a 3.1% increase in the third quarter and a 2.8% increase in the fourth quarter, according to Reuters.
                                • Consumer confidence levels rose in January 2024 for the third month in a row, following three consecutive months of declines, according to data from The Conference Board. The Conference Board’s consumer confidence index increased to 114.8 in January 2024 from 108 in December 2023. According to Dana Peterson, Chief Economist at The Conference Board, “January’s increase in consumer confidence likely reflected slower inflation, anticipation of lower interest rates ahead, and generally favorable employment conditions as companies continue to hoard labor.” Peterson added that the gains in consumer confidence were largest in householders aged over 55. Plans to purchase homes, autos, and large appliances declined slightly on a monthly and six-month basis.
                                • New data from Kelley Blue Book shows the average new vehicle price fell over 2% to $48,759 in December 2023 year over year and was slightly higher than the previous month, according to Cox Automotive. December marked the fourth consecutive month of lower year-over-year transaction prices, a rare event for the industry. The average price for a luxury vehicle dropped 8.8% to $62,523 in December 2023 year over year and dipped less than 1% month over month. According to Cox Automotive’s Michelle Krebs, “When we look at price strength, the pandemic created a seller’s market in which new vehicles were transacting above manufacturers’ suggested retail price in 2022. That market is all but gone now, as higher inventory has led to higher incentives and discounts – lower margins for dealers – and vehicles are now typically selling for under MSRP. The shift from a seller’s market to a buyer’s market is well underway.”
                                • Hybrid market share is expected to grow in 2024 as consumers continue to see hybrids as a comfortable choice in a transition away from internal combustion engine (ICE) vehicles, according to an analysis by Edmunds in its “2024 Predictions” report in Repairer Driven News. The hybrid market share reached nearly 10% in November 2023, an increase of 99% year-over-year compared to the previous year’s 4.9% share. Hybrid vehicles are outpacing EV demand, as EV market share grew by 25% during the same period. According to Ivan Drury, director of insights at Edmunds, “Sales are taking off for the humble hybrid. You’d be hard-pressed to find a hybrid—they’re almost all sold out. They’re vehicles for people who want to live their life with more benefit and less complexity.”
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