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
Recent Developments
Jul 11, 2024 - Dealerships File Suit Against CDK Global
- Auto dealerships are filing lawsuits against CDK Global after a cyberattack of the software provider caused massive disruption to car dealers’ operations and customers’ ability to purchase cars, according to CBS News. Some lawsuits seek class-action status, saying CDK Global did not adequately protect customer data. CDK Global’s 15,000 clients in the US and Canada were impacted by the June outages, which forced car dealerships to take manual steps to process purchases, drastically increasing the amount of time needed to complete a purchase. Service departments using the CDK software were also affected, increasing the time needed for repairs. According to Wards Intelligence data in the WSJ, the cyberattack is estimated to have cost dealers sales of about 50,000 vehicles.
- The average price of a new vehicle is expected to drop in 2024 for the first time in more than a decade as car market dynamics normalize following supply chain challenges in recent years, reports the Wall Street Journal. The average price paid for a new vehicle declined 3% year to date through June 2024 compared to the same period a year ago, reaching about $45,000, per JD Power data. Sales for the first half of 2024 are up an estimated 2% compared to the prior year, according to data from Wards Intelligence. Still, car prices are much higher than before the pandemic, and higher interest rates are limiting consumers’ options. According to Edmunds data reported by the WSJ, monthly car payments reached a record high of $740 in the second quarter of 2024.
- 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.
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