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 17,300 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 61-62 people and has total annual revenue of $65 million. New car dealerships sell an average of just over 1,000 vehicles per year.

    • There are about 17,000 new car dealerships in the US with total annual sales of almost $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

                                Nov 21, 2022 - Deadline to Comply With Safeguards Rule Extended
                                • Auto dealerships are getting a six-month extension to comply with new amendments to the Federal Trade Commission’s (FTC) Safeguards Rule, which requires non-banking financial institutions to develop, implement, and maintain a comprehensive security system to keep customer information safe. (Motor vehicle dealers constitute a “non-banking financial institution” for purposes of the FTC Rule.) The Revised Safeguards Rule applies to all customer information and includes any customers of other financial institutions that have shared information with a dealership. Customer information that’s protected under the Safeguards Rule applies to Personally Identifiable Financial Information (PIFI). PIFI includes not only social security numbers and credit card information, but all transactions that take place that might disclose a customer’s financial information. The new deadline for compliance is June 9, 2023.
                                • Automakers are developing new voice control capabilities for vehicles and adding voice commands that go deeper into the car’s controls, including verbal cues for turning on windshield wipers, adjusting mirrors, or raising the tailgate, The Wall Street Journal reported in November 2022. In an effort to keep drivers’ eyes on the road – and not on dashboard screens – carmakers are expanding voice capabilities and using artificial intelligence to transform cars “into a travel companion of sorts,” WSJ wrote. More drivers are embracing voice controls as the technology has improved. Some 40% of owners said they used their in-vehicle voice systems at least once a week, up from 30% in 2019, according to a US survey conducted last year by research firm Strategy Analytics, according to WSJ.
                                • A rising tide of flood-damaged vehicles may swamp used car lots in coming months. As many as 358,000 vehicles were estimated to be damaged by floods in Florida and the Carolinas as a result of Hurricane Ian in September 2022, according to vehicle history report website Carfax. Some of the flood-damaged vehicles will end up being resold – that’s on top of an estimated 400,000 water-damaged cars currently on the road from past flooding events, according to CNBC. While flood-damaged vehicles may look okay, mechanical, electrical, safety, and health issues can arise later because water causes damage to electronics, lubricants and mechanical systems in vehicles.
                                • The market for luxury vehicles is booming as affluent, cash-rich buyers drive sales of Teslas, Ferraris, Bentleys, and other pricey rides, The Wall Street Journal reported in September 2022. The share of new vehicle sales by luxury brands has steadily grown in recent years, hitting a record 17.3% of the overall US car market in June, according to data from J.D. Power cited in WSJ. That’s up from 14.1% in 2019 and it continues a rise that began years earlier, industry data shows. While sales of super premium cars — brands like Lamborghini, Bentley and Ferrari — remain relatively small, they’ve increased to 6,700 vehicles sold through July 2022, a 35.6% jump compared with the same period five years ago, J.D. Power’s data shows. Sales of premium vehicles also have reached record levels in recent years.
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