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.
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.
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 $47,200, 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 1.8 million domestic vehicles and about 430,000 imports. Now, a typical dealer has a 44-day supply of domestic vehicles in inventory and a 35-day of imports.
- Popular brands include GM (16.7% of total new car sales), Toyota (14.5%), Ford (12.5%), Hyundai (10.7%), Stellantis (Fiat Chrysler, PSA Group – 9.8%), and Honda (8.5%).
- The largest auto dealership groups in the US include AutoNation, Lithia Motors, Penske Automotive, and Sonic Automotive.
Industry Forecast
Auto Dealerships Industry Growth
Recent Developments
Apr 10, 2024 - Faster Growth Forecast for Industry
- The US auto dealerships industry is projected to grow at a 4.5% CAGR from 2024 to 2028, faster than the overall economy's expected growth, according to a forecast from Inforum and the Interindustry Economic Research Fund, Inc. Consumer confidence is likely to improve in the forecast period, which bodes well for retailers. While higher prices and interest rates continue to limit spending, both are expected to improve in 2024. Post-pandemic, consumer spending showed slower gains in 2022 and 2023, supported in part by savings compiled by households from federal pandemic relief programs. Supply chain issues during the pandemic resulted in an extended shortage of vehicle inventory, creating turmoil in the auto industry. The forecast noted the shortages may have a lingering industry impact. "Although shortages are easing, as indicated by rising vehicle inventory levels, supplies of new vehicles remain tight and used-vehicle markets may take years to recover fully," per the report.
- Consumer confidence levels were essentially unchanged in March 2024, after a dip in February 2024 following three consecutive months of growth, according to data from The Conference Board. The Conference Board’s consumer confidence index was 104.7 in March 2024 from 104.8 in February 2024. According to Dana Peterson, Chief Economist at The Conference Board, “Consumers’ assessment of the present situation improved in March, but they also became more pessimistic about the future.” Peterson added that confidence rose among householders 55 and over but fell for those under 55. Plans to purchase homes, autos, and large appliances decreased slightly on a six-month basis.
- New light-vehicle sales SAAR increased in March 2024, totaling 15.5 million units, up nearly 4% from the previous year but down slightly from the last month, according to NADA Market Beat. The average transaction price in March was $44,186, which was 3.6% lower year over year, according to JD Power. Growth in unit sales was generated by a higher number of vehicles on dealer lots and higher OEM incentives. Average incentive spending per unit increased to $2,800 in March, which was 66% higher year over year. New light-vehicle inventory on the ground and in transit was up 40% in March 2023 compared with March 2023. Sales volumes are projected to rise throughout the year, with the 2024 new-vehicle sales forecast expected to be 15.9 million units.
- 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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