The automotive retail industry has been on a rollercoaster ride over the past few years, but it appears to have finally reached some stability, at least for now. The average franchised dealership saw a 3.7 percent increase in net pretax profit in Q1 compared to last year according to the Presidio-NCM Average Dealership Performance Benchmark.
This is great news for dealers following a flat Q4 that saw a modest increase of 0.2 percent year over year. It also comes after nearly three years of profit decline from a high-water mark in 2021 when the entire industry was impacted by the COVID-19 pandemic. It’s a promising sign that the industry could perhaps be establishing a new baseline for performance. The average store’s profit was 1.8 times higher in Q1 than the typical profit for a dealership in 2019.
“The first quarter of 2025 represents a critical inflection point for franchised dealers as demonstrated by the improvement in the Dealership Profitability Index,” said George Karolis, president of The Presidio Group. “After years of volatility, we’re seeing profit performance stabilize and even trend higher, which could signal a new operational normal more robust than pre-pandemic levels. The ongoing tariff dynamics add complexity, but they’re also revealing dealers’ resilience and adaptability in managing market uncertainties.”
Uneven Growth
While average profits were up, not everyone saw the same level of success. Luxury brands continued to outperform the average with an 18 percent surge in pretax profit year-over-year. This marks the second straight positive quarter as Q4 saw a 14.8 percent increase in profit for the luxury segment.
Import brands saw success as well, recording a 6.1 percent increase in profits as customers rushed to buy imported vehicles at pre-tariff prices. However, domestic brands still faced a decline, down 4.8 percent year over year in Q1, making it the only segment not to experience a rebound at the start of the year.
Gross profit per new vehicle also saw declines year over year, down 20.6 percent overall to a new average of $2,005. It dropped for both domestic and luxury brands but was up slightly for import brands, rising from $1,488 in Q4 to $1,587 in Q1.
Operational Profits
Even as average profit margins for new vehicles continue to stabilize, the significance of service and parts departments as revenue streams cannot be overstated. Fixed operations saw a steady increase in gross profit, especially among import-brand stores. Fixed-ops gross profit rose by nearly six percent, while the import segment gained nearly 8 percent.
Personnel expenses, though still a challenge due to inflationary pressures, saw some improvement. The average dealership personnel expense was up two percent year over year and sat at $1.06 million, but is now only 38.1 percent of gross profit. That’s an improvement from 38.4 percent a year ago. Improving employee productivity could further help dealerships optimize their operations.
“In this era of uncertainty, dealers should maintain laser-sharp focus on operational excellence and leadership,” said Paul Faletti, CEO of NCM Associates. “The key is to leverage best practices, lean on expert advisers and actively engage with peers to navigate market complexities. By staying agile and strategic, dealers can transform potential challenges into opportunities for performance gains.”
Uncertainty Looming
As we look to the future, the first quarter of 2025 may very well serve as a benchmark for what’s to come. However, with tariff policies in flux, adaptability remains crucial. There’s no telling what will happen to new-vehicle prices and used vehicle demand. Still, it remains a positive sign that profitability is not only stable but increasing.
The Presidio-NCM Average Dealership Performance Benchmark is based on the aggregated financial results of about 4,200 U.S. franchised dealerships of all brands and sizes that work with NCM Associates. The number of outlets contributing to first-quarter 2025 data represents nearly a quarter of the 18,000-plus franchised dealerships in the U.S., offering a robust and representative snapshot of industry performance.
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