Franchise dealerships are proving resilient in 2025, as profitability rebounds despite ongoing challenges in the new-vehicle market. In today’s episode of Inside Automotive, Kevin Tynan, director of research at The Presidio Group, discusses the recent Q2 2025 Presidio-NCM Average Dealership Performance Benchmark report that reveals how dealers are adapting by leaning into higher-margin areas such as used-vehicles, parts and service, and F&I products.
Drawing from operational data from over 4,000 dealerships, Tynan highlights how dealers have successfully diversified away from their traditional reliance on new-vehicle sales. Though new-vehicle margins remain the weakest segment, dealerships have achieved impressive gains in used-vehicles and fixed operations. The average dealership now generates stronger profits from retailing used inventory and service work, a transition made more urgent as inventory levels return to pre-pandemic norms and pricing power on new-vehicles fades.
One standout trend is the strength of the used-vehicle market. Despite being undersupplied and highly competitive—dealers now contend with Carvana, CarMax, and private sellers—franchise groups are still finding solid margins. In fact, demand is highest for the most affordable used-vehicles, with models priced below $15,000 or even $10,000 often carrying the greatest profit potential. These lower-cost vehicles are attracting consumers priced out of the $48,000 average new-vehicle segment.
“The franchise dealer base has done a very good job of transitioning the dependence on revenue, gross profit, and operating profit away from the new vehicle segment and into others.”
Dealers are also extending the life cycle of trade-ins that were once considered unsellable. Vehicles with 90,000–100,000 miles are now being reconditioned and sold on the lot, thanks to improvements in vehicle durability and demand from buyers seeking affordable transportation options. This approach allows dealers to capitalize on inventory already flowing into their ecosystem.
In terms of broader market health, Tynan believes the current pace of sales and inventory is sustainable. The industry closed Q2 with a smoothed seasonally adjusted annual rate (SAAR) of 16 million units. Inventory remains around a 60-day supply, a level considered to be stable and conducive to maintaining pricing power and profit margins.
EVs are also entering a pivotal period. With federal incentives set to expire at the end of September, Tynan expects a short-term pull-forward of sales before the market shifts into what he calls the “real deal” phase of organic EV adoption. While U.S. EV demand remains tepid compared to China, he views this slower adoption rate as an advantage, giving domestic automakers time to build infrastructure and develop technology at a pace that aligns with market readiness.
Another noteworthy development is the recent rise in U.S. auto manufacturing utilization. Factory capacity hit 69% in Q2, up from 65% the previous quarter. While still below the ideal 80%, the data suggests the recent tariffs and reduced imports may have helped domestic production rebound slightly—a potential validation of protectionist policy efforts.
Looking ahead, Tynan is cautiously optimistic. Dealerships have adjusted cost structures, diversified revenue streams, and maintained a healthy balance between supply and demand. Although affordability remains a concern for consumers, most dealers are managing to sell fewer units at stronger margins. Barring any major economic shocks, he expects these fundamentals to carry the industry through the rest of the year and into 2026.
