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 $64.7 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
                                Source: Vertical IQ and Inforum

                                Recent Developments

                                Jun 10, 2024 - Higher Sales, Falling Producer Prices
                                • Sales for new car dealers were up 2.1% in March 2024 compared to a year ago and up 10% from the previous month, according to data from the Census Bureau. Producer prices for auto dealerships fell significantly, 23%, in March compared to a year ago. The total vehicle miles traveled in the US remained mostly unchanged in March 2024 compared to a year ago and 14.7% higher than the previous month, according to the US Department of Transportation’s Federal Highway Administration. Labor costs were flat in March 2024 and overall employment was up 2.5% compared to a year ago.
                                • Several recent studies show that many US consumers are still reluctant to purchase an EV vehicle. A KPMG study reported by Reuters showed only one-fifth of consumers would buy an electric vehicle over a gas-powered or hybrid car, with 60% of buyers wanting EV charging times to be 20 minutes or less. A new AAA study showed that only 18% of US adults said they would be very likely or likely to buy a new or used EV, down from 23% in 2023, citing cost, range anxiety, and concerns about charging options. People were more willing to try a hybrid vehicle, with 31% saying they’d be very likely or likely to buy one, in the AAA study.
                                • The US new light-vehicle seasonally adjusted annualized sales (SAAR) rose 2.4% in May 2024 year over year, totaling 15.9 million units, and up 0.8% from the previous month, according to NADA Market Beat. Categories performing well in May included more affordable small and mid-size vehicles crossover utility vehicles and sedans. Average incentive spending per unit increased to an estimated $2,640 in May, which was 48% higher year over year. New light-vehicle inventory declined 0.3% from the beginning of May to the end of the month. Sales volumes are expected to increase in 2024, with projected light vehicle sales of 15.9 million units.
                                • Customers have rated aftermarket service providers higher than in previous years, putting pressure on dealer service departments to provide higher levels of service or risk losing customers, according to data from a new JD Power survey in Wards Auto. The JD Power Aftermarket Service Index Study revealed improvement in aftermarket service satisfaction levels in several key areas, including full-service maintenance and repair (up 12 points on a 1,000-point scale), tire replacement (up 5 points), and quick oil change (up 4 points). Overall dealer service satisfaction improved by 5 points in the 2024 JD Power US Customer Service Index Study, but parts and labor shortages have contributed to long wait times. Comparing wait times at aftermarket versus franchise dealer, 26% said their care was serviced/repaired in less than 30 minutes at an aftermarket facility vs. 3% at a dealer, 37% had their car fixed in 30-59 minutes at an aftermarket facility vs. 19% at a dealer, 24% had their car fixed in 1-2 hours at an aftermarket facility vs. 57% at a dealer, and 14% had their car fixed in more than two hours at an aftermarket facility vs. 22% at a dealer.
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