Car Dealership Market: Trends and Industry Analysis

This article was written by our expert who is surveying the industry and constantly updating the business plan for a car dealership.

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The Dojo Business Team

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What are the current global and regional sales figures for car dealerships, and how have they evolved over the last five years?

The global car dealership market reached $4.4 trillion in 2025 with 89.6 million vehicles expected to be sold worldwide.

According to S&P Global Mobility, global new vehicle sales are projected to rise 1.7% year-over-year in 2025. This represents a recovery from supply chain disruptions that constrained the market in previous years. The US market specifically is expected to hit 16.5 million units in 2025, marking a 4% increase from 2024, with forecasts suggesting the market could reach 18 million units by 2027-2028.

Regional performance shows significant variation. China remains the world's largest market with 29.2% of global sales and 25.8 million units sold in 2024. The US follows as the second-largest market with 19.4% share. Europe faces headwinds with Western/Central European markets expected to remain flat at around 15 million units, constrained by economic uncertainty and shifting EV regulations.

Over the past five years, the industry has experienced dramatic fluctuations. The market contracted during COVID-19 in 2020-2021, recovered strongly in 2022-2023 with record profits driven by supply constraints, and is now normalizing in 2024-2025. The US automotive dealership market grew from approximately $2.5 trillion in 2020 to $2.95 trillion in 2025, demonstrating resilience despite challenges.

The average dealership profit has declined from pandemic peaks but remains elevated at $4.1 million per store in 2024, still double pre-pandemic levels of 2019.

Which vehicle segments are driving the most growth in dealership sales today?

Electric vehicles and SUVs are the dominant growth drivers in today's car dealership market.

EV sales reached a record high in Q3 2025 with 438,487 units sold, representing 10.5% of total vehicle sales and marking a 29.6% year-over-year increase. This surge was primarily driven by consumers rushing to purchase before the expiration of the $7,500 federal tax credit on September 30, 2025. General Motors alone sold 66,501 EVs in Q3 2025, with the Chevrolet Equinox EV becoming the best-selling non-Tesla EV in America.

SUVs and crossovers continue to dominate across all propulsion types, accounting for approximately 35.9% of online vehicle purchases in 2025. Models like the GMC Terrain, Chevrolet Traverse, and Buick Envista all posted record third-quarter sales. The shift from sedans to SUVs has been consistent across both new and used car markets, driven by consumer preference for space, versatility, and perceived safety.

Hybrid vehicles are experiencing explosive growth as an intermediate option. In the EU market, hybrid-electric vehicles captured 35.5% market share in Q1 2025, significantly outpacing pure EVs. This trend reflects consumer concerns about charging infrastructure and EV range anxiety, making hybrids an attractive compromise.

The used car market shows similar patterns, with CPO (Certified Pre-Owned) programs gaining traction. CPO vehicles are projected to represent 22% of franchised dealerships' used car sales by 2025, up from 15% in 2023, as consumers seek warranty protection and inspection guarantees when buying pre-owned vehicles.

What are the key consumer behavior trends influencing how people purchase cars from dealerships in 2025?

Digital research dominates the car-buying journey with 92% of consumers conducting extensive online research before visiting a dealership.

Buyers now spend an average of 14 hours and 19 minutes online during their purchasing journey, with 7 hours and 13 minutes specifically dedicated to vehicle research. This represents a fundamental shift where consumers arrive at dealerships significantly more informed about pricing, features, and financing options than in previous years. The expectation gap is notable: 71% of consumers expect seamless omnichannel experiences blending online and in-person interactions, yet only 43% currently use such approaches.

Online reviews have become critical trust signals, with 88% of car buyers trusting online reviews as much as personal recommendations. Google dominates the review landscape at 81% usage, making reputation management essential rather than optional for dealership survival. Speed of response matters dramatically—50% of leads choose the first dealer who responds, yet only 61% of dealers respond within 15 minutes.

Mobile shopping is non-negotiable with 70% of automotive shoppers using mobile devices during their research phase. Nearly 23% of car purchases in 2022 were completed through mobile phones, highlighting the importance of mobile-optimized digital tools. Transparency in pricing has become paramount, with dealers providing upfront pricing achieving higher buyer satisfaction and increased sales volumes.

Approximately 39% of car dealers now enable consumers to complete every step of the purchasing process online. While fewer than 3% of consumers have completed a fully online purchase, 29% express openness to an entirely online experience for their next vehicle. The global online car buying market reached $370.70 billion in 2025 and is projected to grow at 12.7% CAGR through 2032.

You'll find detailed market insights in our car dealership business plan, updated every quarter.

How are interest rates, financing options, and leasing programs affecting dealership profitability and buyer decisions?

Interest rates remain elevated in 2025, significantly impacting affordability and dealership F&I revenue.

F&I (Finance and Insurance) departments have become increasingly critical as front-end vehicle margins compress. Average F&I gross profit per vehicle reached $2,515 in Q2 2025, contributing 30-40% of total dealership gross profit despite representing ancillary revenue. High interest rates make financing more expensive for consumers, which paradoxically increases F&I revenue through higher interest spreads while simultaneously reducing demand for add-on products like GAP insurance and extended warranties.

The Federal Reserve's rate decisions directly impact dealer profitability. While rates remained elevated through mid-2025, industry forecasts predict gradual declines through the remainder of 2025 and into 2026, which should improve affordability and stimulate demand. However, 72% of consumers anticipate that tariffs and economic uncertainty will make vehicles less affordable, creating a challenging environment regardless of interest rate movements.

Dealers are responding by diversifying financing sources and strengthening relationships with captive finance companies and credit unions. The availability of manufacturer-subsidized financing on select models creates competitive advantages, with brands like Toyota and Lexus maintaining strong loyalty through attractive financing programs.

What digital tools, online platforms, and omnichannel strategies are dealerships adopting to attract and retain customers?

Dealerships are implementing comprehensive digital retailing platforms that enable customers to complete most or all purchase steps online.

Digital retailing tools now include virtual showrooms, 360-degree vehicle views, payment calculators, trade-in valuation tools, financing applications, and digital contract signing. According to Cox Automotive's research, 61% of US consumers say that the availability of an online transaction option influenced their buying decision. The most successful dealerships are integrating these tools seamlessly with their physical operations rather than treating them as separate channels.

Inventory management systems connected to real-time online listings have become essential. Dealers are using AI-powered merchandising tools to optimize vehicle photography, descriptions, and pricing across multiple listing platforms simultaneously. Companies like Spyne provide automated solutions that create mobile-ready campaigns, manage inventory across channels, and deliver targeted advertising to qualified buyers.

CRM (Customer Relationship Management) systems integrated with digital tools allow dealerships to track customer interactions across touchpoints. When a customer researches vehicles online, requests information, or books a test drive, this data flows into the CRM, enabling personalized follow-up and improving conversion rates. Virtual sales consultants can respond to inquiries remotely, demonstrate vehicles via video, and coordinate deliveries for customers who prefer to avoid showroom visits.

Video content has become particularly influential, with 75% of consumers reporting that video influenced their shopping behavior. Dealerships are creating walkaround videos, feature explanations, and customer testimonials to engage shoppers at earlier stages of the buying journey. Interactive displays and digital information kiosks in physical showrooms bridge the digital-physical gap, allowing customers to access online tools while on-site.

Data analytics platforms help dealerships understand customer behavior patterns, optimize inventory based on local demand, and predict which customers are most likely to purchase. Predictive lead scoring uses AI to identify high-intent shoppers and prioritize sales team follow-up. Chat tools powered by AI handle initial inquiries 24/7, capturing leads outside business hours and providing instant responses that modern consumers expect.

This is one of the strategies explained in our car dealership business plan.

How has the rise of electric vehicles changed dealership operations, inventory strategies, and after-sales services?

Electric vehicles have fundamentally transformed dealership operations requiring substantial investments in infrastructure, training, and service capabilities.

Dealerships selling EVs must install charging stations, both for inventory management and customer convenience during test drives. The investment in EV-specific diagnostic equipment and tools ranges from $50,000 to $200,000 per location depending on brands carried. Technicians require specialized training to work safely with high-voltage systems, with certification programs taking 40-80 hours of coursework. Many dealerships report that recruiting and retaining EV-qualified technicians has become a significant challenge given the shortage of skilled workers.

Inventory strategies have shifted dramatically. EVs typically require longer explanations and test drives since many customers are unfamiliar with the technology. Dealers are dedicating specific sales specialists to EVs who understand range, charging infrastructure, incentives, and total cost of ownership calculations. The collapse of the $7,500 federal tax credit on September 30, 2025 created a surge in Q3 EV sales followed by anticipated slower demand in Q4, forcing dealers to adjust inventory levels and pricing strategies rapidly.

After-sales service represents both a challenge and opportunity. EVs require significantly less routine maintenance (no oil changes, fewer brake replacements due to regenerative braking, simpler transmissions) which reduces traditional service revenue. However, software updates, battery diagnostics, and electric drivetrain repairs require specialized knowledge and equipment. Dealers are developing new service packages including charging equipment installation, battery health monitoring, and over-the-air update support.

Some manufacturers are exploring direct-to-consumer sales models for EVs (like Tesla), which threatens traditional dealership franchises. However, established dealers argue that their local presence, service infrastructure, and customer relationships remain valuable even in an EV-dominated future. Hybrid approaches where customers complete much of the purchase online but rely on dealerships for delivery, trade-ins, and service are emerging as the most common model.

Parts departments are stocking EV-specific components including charging cables, adapters, and high-voltage system parts. The longer lifespan of EV drivetrains compared to internal combustion engines may reduce long-term parts sales, pushing dealerships to diversify revenue through accessories, charging solutions, and extended service contracts tailored to EV-specific concerns like battery degradation.

What regulatory changes or government incentives are currently shaping the car dealership market, particularly in major markets like the US, Europe, and Asia?

The expiration of the US federal EV tax credit on September 30, 2025 represents the most significant recent regulatory change impacting dealerships.

This $7,500 credit drove record EV sales in Q3 2025 as consumers rushed to purchase before the deadline. The credit's removal under the "One Big Beautiful Bill Act" eliminates a major sales incentive, though some manufacturers like Hyundai are offering equivalent cash incentives ($7,500 on 2025 Ioniq 5 models) to maintain momentum. Several states maintain their own EV incentives, creating a patchwork of regional variations that dealerships must navigate.

Emissions regulations in Europe remain stringent despite some recent relaxation. The EU's 2025 emission targets continue to influence manufacturer production decisions and dealer inventory mix. Some European countries have reduced or eliminated EV subsidies due to budget constraints, impacting dealer sales strategies. The UK has also adjusted its Net Zero timeline, providing automakers more flexibility but creating uncertainty for dealerships planning long-term EV investments.

Tariff policies under the current US administration have created significant uncertainty. Universal tariffs on imported vehicles and components affect pricing across the supply chain. Chinese automakers face particularly high tariffs, limiting their US market entry despite growing global presence (over 5 million vehicles exported from China in 2023). These trade barriers protect domestic manufacturers and dealers but may limit consumer choice and increase vehicle prices.

California's CARB (California Air Resources Board) regulations have historically set de facto national standards for emissions, but recent federal challenges to California's waiver authority create regulatory uncertainty. Dealers in states following California standards face different compliance requirements than those in other states, complicating inventory management for multi-state dealer groups.

Interest rate policies from the Federal Reserve, while not dealer-specific regulations, dramatically impact financing costs and thus vehicle affordability. The Fed's rate decisions in 2025 will significantly influence dealer profitability and sales volumes through their effect on monthly payments and F&I income.

We cover this exact topic in the car dealership business plan.

How are supply chain challenges impacting dealership inventory and pricing strategies?

While semiconductor shortages have largely normalized, dealerships continue facing inventory management challenges and evolving supply chain dynamics.

The acute semiconductor shortage of 2020-2022 has eased significantly, allowing vehicle production to recover. However, industry experts predict potential renewed shortages in late 2025 or 2026, particularly for mature-node chips (40 nanometers and above) used extensively in automotive applications. These chips control everything from infotainment systems to engine management, and underinvestment in older fabrication processes while resources flow to advanced AI chips creates vulnerability.

Dealership inventory levels have normalized from the extreme lows of 2021-2022 when vehicles sold above MSRP and showrooms sat nearly empty. Average days' supply has returned to more typical levels, giving consumers more choices but reducing the pricing power dealers enjoyed during shortages. The transition from a seller's market to a more balanced market has compressed front-end gross profits. New vehicle gross profit margins dropped to $2,326 per unit through the first nine months of 2024, down 33.5% from peak levels but still elevated compared to pre-pandemic norms.

Brands with inventory challenges face different dynamics than those with balanced supply. Nissan dealerships, for example, struggled in 2024 with excess inventory and profitability declining to 15-year lows due to weak demand. Conversely, brands like Toyota and Lexus maintained disciplined inventory management, supporting stronger margins and dealer profitability. These disparities create significant variation in dealership performance even within the same local markets.

Logistics costs and delivery times remain elevated compared to pre-pandemic levels, though improving. Dealers must factor longer lead times into their ordering strategies, particularly for vehicles with specialized configurations or imported components. The geographic concentration of semiconductor manufacturing in Taiwan and Asia creates geopolitical risk that dealers cannot directly control but must consider in inventory planning.

Pricing strategies have shifted from the "market adjustments" common in 2021-2022 toward manufacturer incentives and promotional financing to maintain sales velocity. Dealers holding excess inventory of specific models may offer significant discounts (up to 20% off MSRP in some cases) while high-demand EVs or luxury vehicles maintain firm pricing. The key strategic challenge is predicting which segments will remain supply-constrained versus which will face oversupply in the coming months.

What are the average profit margins across new car sales, used car sales, financing, and after-sales services within dealerships?

The profit structure reveals that vehicle sales generate the majority of revenue but service, parts, and F&I departments contribute disproportionately to profitability. This reality drives dealership strategy toward building long-term customer relationships through service retention rather than maximizing profit on individual vehicle transactions.

Successful dealerships balance front-end vehicle profit with F&I performance and cultivate service loyalty. The variance between well-managed and poorly-managed dealerships within the same franchise can be substantial—top-performing stores may achieve F&I profits 30-50% higher than average through better training, process optimization, and product menu design.

It's a key part of what we outline in the car dealership business plan.

How are dealership networks consolidating, merging, or franchising, and what does that mean for market competition?

Dealership consolidation accelerated dramatically with 510 rooftops changing hands in 2024, marking the fourth-busiest year for M&A activity.

The average dealership blue sky value (the premium paid above hard assets for goodwill and franchise value) reached $20.9 million in 2024, down 14% from 2023's peak but still 122% above 2019 levels. Private buyers accounted for 95% of transactions, with smaller privately-owned dealer groups becoming the most active acquirers. Public consolidators (Asbury, AutoNation, Group 1, Lithia, Penske, Sonic) slowed US acquisition spending to just $174 million in Q1 2025, a 91% drop year-over-year, as they focused on digesting previous acquisitions and improving operational efficiency.

High-performing franchises like Toyota, Lexus, Honda, and Mazda command premium valuations due to consistent profitability and customer loyalty. Toyota and Lexus dealerships typically sell for the highest multiples given their strong brand reputation and earnings stability. Conversely, struggling brands like Nissan and some Stellantis franchises trade at discounts, creating acquisition opportunities for buyers with turnaround expertise or long-term growth strategies.

The trend toward geographic clustering has intensified. Buyers prefer acquiring multiple dealerships in the same market to achieve operational efficiencies in marketing, back-office functions, and management. Group 1 Automotive and other large consolidators are aggressively pursuing market dominance in specific regions rather than scattered national expansion. This "hub and spoke" model allows centralized parts inventory, shared service staff, and consolidated advertising while maintaining separate franchise identities.

Family-owned dealership groups backed by private equity or family offices represent a growing buyer class. These entities have capital dedicated to acquisitions and teams focused on identifying opportunities, giving them advantages in competitive bidding situations. The average pre-tax profit per dealership of $4.1 million in 2024, though down from $6.5 million in 2022, remains attractive to financial buyers seeking stable cash flow assets.

Partial deals have become more common, where larger groups sell select dealerships or different parts to different buyers to maximize value or address geographic or brand-specific strategic considerations. These complex transactions require careful handling of shared employees, financing arrangements, and vendor contracts.

Consolidation creates both opportunities and challenges for independent dealers. While it increases competition from well-capitalized groups with economies of scale, it also creates exit opportunities for owners reaching retirement age. The potential Honda-Nissan merger, which could create the world's third-largest OEM, would further reshape manufacturer-dealer relationships and potentially trigger additional dealership consolidation as franchise networks are rationalized.

What role do customer experience, loyalty programs, and personalized services play in dealership competitiveness today?

Customer experience has become the primary differentiator as vehicle products themselves become increasingly commoditized across brands.

• Omnichannel Integration: Customers expect seamless transitions between online research, phone inquiries, dealership visits, and post-purchase service. Dealers tracking customer interactions across all touchpoints can provide personalized experiences that acknowledge previous conversations and preferences, significantly improving conversion rates and satisfaction.
• Transparent Pricing: Dealerships providing upfront, no-haggle pricing or clear price ranges online achieve higher customer satisfaction scores and close more sales. The traditional negotiation model is increasingly rejected by younger buyers who research thoroughly and expect straightforward transactions.
• Speed and Responsiveness: Half of all leads choose the first dealer who responds. Yet only 61% of dealerships respond within 15 minutes. Investment in rapid response systems, including AI-powered chatbots for after-hours inquiries and mobile sales consultants who can engage customers immediately, creates competitive advantage.
• Personalized Communication: CRM systems integrated with purchase history, service records, and browsing behavior enable targeted outreach. Instead of generic mass marketing, successful dealerships send personalized maintenance reminders, trade-in value updates on owned vehicles, and new model introductions aligned with stated preferences.
• Service Experience: Given that service and parts generate nearly 50% of gross profit, creating exceptional service experiences drives long-term profitability. Service advisers trained in customer communication, transparent repair estimates with photo documentation, loaner vehicle programs, and convenient scheduling (including mobile service) all contribute to retention.
• Loyalty Programs: Structured programs offering service discounts, priority scheduling, exclusive events, or points toward future purchases help retain customers through multiple ownership cycles. Manufacturers' captive financing programs often include loyalty incentives for repeat buyers within the brand family.
• Technology Integration: Customers increasingly expect dealerships to match the digital sophistication of other retail sectors. This includes appointment scheduling apps, service status updates via text, video walkarounds of recommended repairs, and digital payment options. Dealerships lagging in technology adoption risk losing customers to more digitally-advanced competitors.
• Community Engagement: Local dealerships maintaining strong community presence through sponsorships, charitable activities, and events build brand affinity that transcends pure transactional relationships. This "hometown dealer" advantage becomes more valuable as consolidation increases.

The economics are compelling: acquiring a new customer costs 5-7 times more than retaining an existing one. Dealerships with high service retention rates (customers returning for regular maintenance) achieve dramatically higher lifetime customer value and generate referrals that reduce customer acquisition costs.

Get expert guidance and actionable steps inside our car dealership business plan.

What forecasts exist for dealership market growth over the next five years, and which regions or segments are expected to expand the fastest?

The global automotive dealership market is projected to grow from $5.64 billion in 2025 to $7.21 billion by 2034 at a 2.76% CAGR, though these figures vary by source and methodology.

The US market shows stronger growth projections with the automotive dealership sector expected to expand from $2.95 trillion in 2025 to $3.68 trillion by 2030, representing a 4.52% CAGR. This growth is supported by normalizing inventory levels, sustained consumer demand, and continued economic expansion despite periodic volatility. Sales volumes are forecast to reach 18 million units annually by 2027-2028, up from 16.5 million expected in 2025.

Electric vehicles represent the fastest-growing segment with global EV sales projected at 21.3 million units in 2025 (24% market share) and potentially doubling to 40.1 million by 2030. However, growth rates are decelerating from the explosive pace of 2021-2023 due to affordability concerns, charging infrastructure limitations, and policy uncertainty. The collapse of US federal incentives will particularly impact 2026 growth until the market adjusts to new pricing dynamics.

Regional growth patterns show significant divergence. Asia-Pacific, led by China and India, is expected to experience the fastest expansion driven by rising middle-class incomes, urbanization, and increasing vehicle ownership rates. China's market, already the world's largest, will continue dominating with 23.2 million vehicles projected for 2025. India's growing population and economic development position it as a key growth market despite current challenges.

North America will see moderate steady growth supported by fleet replacement cycles, improving affordability as interest rates decline, and strong commercial vehicle demand. The used car market is particularly robust with the global market projected to reach $2.70 trillion by 2030 growing at 6% CAGR, driven by certified pre-owned programs, improved transparency in used car markets, and digital platforms facilitating easier transactions.

Europe faces more modest growth prospects constrained by economic uncertainty, mature markets with high existing vehicle ownership, and aggressive emissions regulations forcing costly transitions. However, Western European luxury segments (Germany's premium brands) will likely maintain strong performance supported by global demand.

The online car buying segment will grow fastest across all regions at 12.7% CAGR, reaching $856.57 billion by 2032 from $370.70 billion in 2025. This digital transformation represents fundamental change in how vehicles are marketed, sold, and serviced rather than a temporary trend. Dealerships successfully integrating digital and physical channels will capture disproportionate market share.

This is one of the many elements we break down in the car dealership business plan.

Conclusion

This article is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult with a qualified professional before making any investment decisions. We accept no liability for any actions taken based on the information provided.

Sources

1. The Business Research Company - Motor Vehicle And Parts Dealers Global Market Report
2. Focus2move - The Top 50 Car Market Ranking
3. Market Research Future - Automotive Dealership Market
4. S&P Global Mobility - 2025 Auto Sales Forecast
5. Cox Automotive - Record High Electric Vehicle Sales Q3 2025
6. Demand Local - Consumer Behavior in Car Buying Statistics
7. Experian - Auto Loan Rates and Financing
8. Dojo Business - Car Dealership Margins
9. Haig Partners - 2025 Economic Outlook for Auto Dealers
10. Baker Tilly - 2025 Dealership M&A Forecast