This article provides key financial insights into running a car dealership, focusing on average revenues, profit margins, and the essential factors influencing profitability in this business. Whether you're starting your own dealership or looking to improve an existing one, understanding these financial benchmarks is crucial for success.
The average car dealership revenue and profitability can vary significantly depending on the size and type of dealership. Here's an overview of essential financial metrics and insights that will help guide your dealership's financial planning:
| Metric | 2025 Benchmark / Range | Details |
|---|---|---|
| Average Annual Revenue | $73.3M (franchised); $4M+ (independent) | Franchised dealerships tend to generate much higher revenues compared to independent or used-only operations. |
| Gross Profit Margin (New) | 7–10% | New car gross profit margins are lower due to manufacturer price constraints and competitive pricing pressures. |
| Gross Profit Margin (Used) | 12–15% | Used car margins are typically higher as dealers can set prices more flexibly. |
| Gross Profit Margin (Service) | 45–55% | Service and parts operations are highly profitable, generating the highest margins in the dealership. |
| Net Profit Margin | 1–3% | Net profit margins remain low overall due to high operating costs, even though the gross margin is relatively good. |
| F&I Gross Profit per Vehicle | $2,505 | F&I products like financing and insurance contribute significantly to dealership profits. |
| Operating Expense Ratio | 25–30% | Operating expenses such as staff, rent, and marketing are key components of total revenue. |
What is the average annual revenue of a typical car dealership in the current market?
The average annual revenue for a franchised car dealership is about $73.3 million, while smaller independent dealerships typically generate around $4 million in revenue annually.
This figure can vary depending on the location, size, and type of dealership, with franchised dealerships usually having a broader product offering and larger customer base.
Revenue for a dealership is generated primarily through new and used vehicle sales, service and parts, and financing/insurance products.
What is the average gross profit margin across new car sales, used car sales, and service operations?
The average gross profit margins differ greatly by department within a dealership.
New car sales typically have a gross profit margin of 7–10%, while used car sales have a higher margin at 12–15%.
Service operations, including repairs and parts, contribute significantly more, with margins reaching 45–55%. This is why service departments are critical to profitability.
How much of total revenue generally comes from new car sales compared to used car sales and aftersales services?
On average, new car sales contribute around 50–55% of a dealership's revenue.
Used car sales represent about 30–35%, while aftersales services (including service, parts, and F&I products) make up 15–20% of total revenue.
However, aftersales services often provide a much larger proportion of gross profit due to their high margins.
What is the typical net profit margin for dealerships once all expenses are accounted for?
The typical net profit margin for car dealerships is quite low, generally ranging from 1–3%.
This low figure is largely due to high operating expenses, including staff, rent, utilities, and marketing.
Despite this, dealerships can still be profitable due to their high gross margins, particularly in used car sales and service operations.
What is the average gross profit per new vehicle sold versus per used vehicle sold?
The gross profit per new vehicle sold averages around $3,284, while the gross profit per used vehicle sold is typically about $1,668.
This disparity is mainly due to the ability to markup used vehicles more significantly than new cars, which are subject to more price control from manufacturers.
How important are financing and insurance (F&I) products in contributing to overall dealership profitability, and what percentage of profit do they represent?
Financing and insurance (F&I) products are crucial to a dealership's profitability.
The average gross profit per vehicle from F&I products is $2,505, and these products account for 25–35% of the dealership’s total gross profit.
F&I products are highly profitable due to the substantial markup dealers can apply on financing terms, insurance packages, and extended warranties.
What are the average operating costs as a percentage of revenue, including staff, rent, and marketing expenses?
Operating costs for a dealership typically range from 25% to 30% of total revenue.
These costs include staffing, rent for the dealership premises, advertising, and other administrative expenses.
Dealerships that are less efficient may see these operating expenses exceed 30%, negatively impacting profitability.
How much revenue and profit does the service and parts department typically generate relative to vehicle sales?
The service and parts department generates about 15–20% of a dealership’s total revenue but contributes 45–55% of the gross profit due to its high margins.
Because service operations have significantly higher profit margins than vehicle sales, they are an essential part of the dealership’s overall profitability.
What are the typical inventory turnover rates for new and used vehicles, and how do they impact profitability?
New vehicles typically have an inventory turnover rate of 12 times per year, meaning they turn over once every 30 days.
Used vehicle turnover is slower, averaging about 9–10 times per year with a corresponding longer time to sell—about 40 days.
Higher inventory turnover reduces holding costs and improves liquidity, making dealerships more profitable.
How do seasonal fluctuations affect monthly revenue and profit margins in dealerships?
Seasonal fluctuations significantly impact dealership revenue, with sales peaking in spring (March–May) and autumn (September–November).
Sales slow down in January and August due to factors like the holiday season and vacation periods, leading to lower revenues and profits.
Dealerships often counter these slowdowns with service promotions to maintain cash flow during off-peak months.
What are the current industry benchmarks for return on assets (ROA) and return on equity (ROE) in car dealerships?
In 2025, return on assets (ROA) for strong dealerships is typically around 5%, while return on equity (ROE) ranges from 15% to 25%.
ROA and ROE are crucial metrics for evaluating the efficiency of dealership operations and capital utilization.
Higher ROE indicates better returns from equity investment, which is essential for attracting investors and sustaining growth.
How have average revenues, profits, and margins in dealerships changed over the past three years given shifts in demand, supply chain issues, and electric vehicle adoption?
Over the past three years, dealership profits have fluctuated due to supply chain disruptions, changes in consumer demand, and the rise of electric vehicles.
Revenues and margins fell by 25–35% following supply chain improvements and the stabilization of vehicle pricing, but have since rebounded to slightly above pre-pandemic levels.
Despite the challenges posed by electric vehicle adoption, service revenue has remained strong, although the mix of service parts may change as electric vehicles require fewer traditional maintenance services.
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.
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