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 21,400 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. New car dealerships sell an average of just over 1,000 vehicles per year.

    • There are about 21,400 new car dealerships in the US with total annual sales of over $1.1 trillion.
    • The average price of a new vehicle is about $42,300, a figure that has tracked closely with inflation over the past decade.
    • 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 just under 1 million domestic vehicles and about 200,000 imports. Now, a typical dealer has a 26-day supply of domestic vehicles in inventory and a 22-day of imports.
    • Popular brands include GM (14.8% of total new car sales), Ford (12.2%), Toyota (15.6%), Stellantis (Fiat Chrysler, PSA Group - 11.8%), and Honda (9.8%).
    • The largest auto dealership groups in the US include AutoNation, UnitedAuto Group, and Sonic Automotive.
                                Industry Forecast
                                Auto Dealerships Industry Growth
                                Source: Vertical IQ and Inforum

                                Recent Developments

                                May 18, 2023 - Average Car Age Rises Again
                                • The average age of cars and light trucks in operation on US roads reached a new record in 2023 of 12.5 years, up by over three months over 2022, according to S&P Global Mobility data in Auto Remarketing. More than 284 million vehicles are currently in operation in the US. Constrained new vehicle sales have put pressure on the average vehicle age. 2023 marks the sixth straight year of growth in the average vehicle age of the US fleet. However, new vehicle sales are expected to exceed 14.5 million units in 2023, which is projected to slow the rate of average age growth in the coming year. According to Todd Campau, associate director for S&P Global Mobility, “While pressure will remain on average age in 2023, we expect the curve to begin to flatten this year as we look toward returning to historical norms for new vehicle sales in 2024.”
                                • Wards Intelligence data shows that car dealerships sold nearly five times as many electric vehicles (EVs) in 2022 as they had in 2020, according to the National Automobile Dealers Association. The EV sales for 2023 to date are also looking strong. Sales in the first three months of 2023 grew by 60% compared to the same time last year. Demand for EVs increased by 350% from 2020 to 2022, according to a recent analysis by Consumer Reports. Demand is expected to continue to rise as the cost of EVs falls, options increase, charging infrastructure improves, and more consumers have direct experiences with EVs.
                                • In 2022, Lithia Motors surpassed longtime leader AutoNation as the new-vehicle retail sales leader of publicly owned dealership groups in the US, according to Automotive News. Lithia Motors had once been the smallest and lowest ranked of the publicly owned dealerships groups but grew by buying dealerships faster than rivals. Lithia retailed 271,596 new vehicles in 2022, an increase of 4.2%. Its sales figure includes a small number of sales in Canada and sales at some motorcycle and recreational vehicle dealerships. AutoNation, which had held the top spot since 1997, retailed 229,971 new vehicles in 2022, a decrease of 12%. Dealers rounding out the top five in new-vehicle retail sales in 2022 were Penske Automotive Group (retailed 185,831 new vehicles), Group 1 Automotive (retailed 154,714 new vehicles), and Ashbury Automotive Group (retailed 151,179 new vehicles).
                                • New car prices were down slightly in March 2023 month over month but up nearly 4% from a year ago, with the average transaction price (ATP) reaching $48,008, according to data from Kelley Blue Book (KBB). Luxury sales have been robust, and the luxury vehicle share hit 18% of total sales in March. A luxury car's average transaction price (ATP) was $65,202 in March, down slightly from February. Buyers have been paying above the average manufacturer's suggested retail price (MSRP) for 20 months, as low inventory factored into costs. However, the trend shifted in March 2023, when the average price paid by consumers fell to $171 below the average sticker. According to Rebecca Rydzewski, research manager of economic and industry insights for Cox Automotive, "The latest transaction data from March reveals new-vehicle prices continued a downward trend through the first quarter of 2023. Both luxury and non-luxury prices were down month over month. We've been anticipating transaction price declines, as inventory has been steadily improving and choice has expanded. More vehicles on dealer lots – and on their competitors' lots – means dealers simply don't have the pricing power they did six months ago."
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