Here’s What Auto Retail Experts Expect in 2025Here’s What Auto Retail Experts Expect in 2025

While it’s too early to know what a new year, a new president and new AI tools will mean to the retail auto market, there are hot spots to watch as the year progresses.

But as a long-time WardsAuto contributor, I can tell you about the trends in fixed ops, sales, F&I and even the buy-sell market my colleagues and contacts are watching as the year unfolds.

The following are the top five trends and digressions industry professionals say will impact the year ahead for automobile dealers:

U.S. New Vehicle Sales Rise

Attribute the light-vehicle sales bump to higher inventory, lower interest rates and growing factory incentives and dealer discounts. It’s a well-established trend that as new-vehicle inventory has recovered, factory incentives and dealer discounts have grown, making the average new vehicle more affordable. That’s good news for dealership returns overall and, therefore, for dealership values.

According to a joint forecast from J.D. Power and GlobalData, U.S. new-vehicle sales in December 2024 are on track for just over 1.5 million, an increase of 7.3% vs. a year ago, on an average selling-day basis.

"There is a clear positive momentum shift for the new-vehicle market, especially in the fourth quarter,” says Jonathan Smoke, Cox Automotive's chief economist. Putting the presidential election in the rearview mirror reduces at least some uncertainty, which has probably helped consumer confidence, he says.
Gross Profit Per Vehicle Declines

The downside to better affordability is an ongoing decline in per-vehicle profits, and that’s expected to continue in 2025, too, says George Karolis, president of The Presidio Group, Atlanta.

He calls this trend “The Great Normalization,” considering per-vehicle profits and dealership profits in general were hugely inflated during the early pandemic and continued at high levels during acute supply-chain shortages, like that involving computer chips.

According to J.D. Power and GlobalData, U.S. retail new-vehicle inventory is projected to be around 2 million at the end of December, down 1.3% vs. November but an increase of 24.7% vs. December 2024.
The good news is that total dealership profitability is showing signs of leveling off at a much higher level — almost double — what it was before the pandemic, instead of dropping back down to 2019 levels, Karolis says.

“The decline in net pretax profit for the average franchised store appears to be stabilizing — the falloff through nine months of 2024 was slightly better than the drop at midyear,” Karolis reports.

Post-Election Optimism

Meanwhile, voters' reaction to the presidential election is divided, but having the election in the rearview mirror reduces some uncertainty and, for some auto shoppers, that might be enough to get them off the fence and into the showroom, Kerrigan says.

“Both consumers and dealers are feeling more confident with the election behind us,” she says. “Dealers feel like they might not be as hamstrung by regulations.”

That is, dealers may be encouraged by the return of a Trump administration, which promises to slow regulations and hit the brakes on the federal government’s goal of making half of all new vehicles sold in the U.S. in 2030 zero-emission vehicles.

Dealerships Cut Costs, Boost Fixed Ops Services

With new-vehicle profits down, dealerships are turning to fixed operations to compensate. According to the Presidio Group, fixed ops gross profit increased 5.4% for the average dealership year over year during the first nine months of 2024, representing 50.7% of total gross profit.

Publicly traded dealer groups report they have increased headcount for service and parts technicians, invested in service capacity and, in many cases, raised labor rates.

In addition, dealerships in the current environment should consider cutting costs in other areas, including advertising and personnel — other than service and parts technicians, who should remain a high priority, says Presidio’s Karolis.

Buy-Sell Market Players Gets Pickier

With inventory rising and profits normalizing, dealership buyers can afford to take a closer look at possible dealership acquisitions, with less fear of missing out, Alan Haig, president of Florida-based Haig Partners, tells WardsAuto.

“During the pandemic, every dealership — every dealership, for every brand — sold every new car for a really high profit, including charging over sticker. Every franchise was doing well, Nissan and Stellantis included,” Haig says.

“When the pandemic ended, and supply came back for a number of these brands, profits dropped very quickly. If it was a weak brand, or if they weren’t being operated well, a lot became less profitable or even were losing money,” he says.

“We’re still selling dealerships for strong prices,” Haig adds. “(Those) with good brands that are being operated well.”