Declining new-vehicle profits are pushing dealers to lean more heavily on higher-margin parts, service and F&I operations.
On the Dash:
New-vehicle sales have softened as high prices continue to pressure consumer demand, and dealers are responding by leaning more heavily on higher-margin parts, service and finance and insurance operations. That strategy highlights the dealership business model’s ability to offset weakness in one department with stronger performance elsewhere.
According to a Kerrigan Advisors market analysis of publicly traded dealership group filings, dealer profitability surged during the pandemic as tight supply pushed automakers toward pricier, higher-margin vehicles and dealer markups climbed. Average pretax profit per dealership more than tripled, from $1.9 million in 2018 to $6.8 million in 2022. Yet, that profitability has since declined, falling to about $3.9 million in 2025.
Conversely, parts and service have moved in the opposite direction, with the average gross profit from those operations rising from $3.3 million in 2020 to $5 million in 2025, giving dealers an important source of profit as vehicle margins normalize.
Moreover, Ford is positioning its dealers to capture more of that opportunity, as the automaker recently recommitted to parts and service support for older vehicles and expanded technician training to help dealers service those models, with the average vehicle on U.S. roads approaching 13 years old.
According to Ford CEO Jim Farley, the company plans to expand its parts catalog to cover vehicles beyond its own portfolio, stating during the company’s Q1 2026 earnings call, “We’re going to expand our parts catalog, in terms of price and diversity, and we’re going to start to focus on not just Ford parts, but multimake parts.” Notably, that expansion could give dealers another avenue to attract service customers who own other brands.
Kerrigan Advisors is the leading sell-side advisor and thought partner to auto dealers nationwide. Since its founding in 2014, the firm has led the industry with the sale of over 450 franchises generating more than $11 billion in client proceeds, including three of the largest transactions in auto retail history – the sale of Jim Koons Automotive Companies to Asbury Automotive Group, Leith Automotive to Holman, and Hennessy Automotive Companies to Group 1 Automotive (planned and expected to close in Q4 2026). The firm advises the industry’s leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, Kerrigan Advisors is the only firm in auto retail exclusively dedicated to sell-side advisory, providing its clients with the assurance of a conflict-free approach.
Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, which includes Kerrigan Advisors’ signature blue sky charts, multiples and analysis for each franchise in the luxury and non-luxury segments. To download a preview of the report, click here. The firm also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail Index is designed to track dealership valuation trends, while also providing key insights into factors influencing auto retail. To read the 2025 Kerrigan Dealer Survey, click here. To read the 2026 Kerrigan OEM Survey, click here. Kerrigan Advisors is also the co-author of NADA’s Guide to Buying and Selling a Dealership. Additionally, Kerrigan Advisors publishes a podcast, Beyond Blue Sky – A Kerrigan Conversation, where Kerrigan Advisors’ clients and industry leaders share the mindset, strategy and personal stories behind a once-in-a-generation transaction.
Contact us to learn more about Kerrigan Advisors’ sell-side services.
All of our conversations are 100% confidential.
