Dealership Profits Decline

Average dealership profit declined in the second quarter, but two key areas improved: fixed operations and finance-and-insurance.

According to a dealership performance benchmark report by the Presidio Group, net pretax profit for franchised dealerships dropped nearly 12% year-over-year. But the firm noted that last year’s boost in performance was driven by a tariff-related spike in demand.

“Looking beyond the year-over-year comparison reveals an industry continuing to adapt as new-vehicle margins fluctuate,” said group President George Karolis.

“While inflation continues to pressure expenses, technology innovation and operating process improvement should eventually offer dealers a new frontier for productivity gains.”

New-vehicle unit sales were relatively flat year-over-year, but used-vehicle sales fell over 2%, according to the report. Gross profits of new and used vehicles fell about 14% and 10%, respectively.

Meanwhile, F&I income per retail unit rose nearly 5% to $1,769, which Presidio said is its highest quarterly number since it began tracking. And fixed-operations gross profit rose 5%, generating nearly 53% of total dealership gross earnings. 

Presidio pointed out an area of opportunity in expense management. Personnel expense increased about 2%, accounting for nearly 38% of gross profit.

“Dealers tell us in person and on our recent survey that they’re focused on reducing costs and investing in technology to improve productivity and the customer experience, but savings aren’t showing up in the numbers yet,” Karolis said.

“Personnel as a share of gross has ticked up, not down. That suggests the industry hasn’t translated its tech and productivity ambitions into actual cost savings yet.”

The report said that looking ahead dealerships’ profit trajectory will depend on sequential vehicle margin stabilization, sustained fixed-operations growth, and improved expense discipline.