2026 Market Preview
Looking back to look ahead
Industry Intelligence:
Metro vs. Rural Dealership Impact
A comprehensive analysis of the 2025 NADA Data annual report — examining how national trends affect franchised dealerships differently based on market size, geography, and competitive density.
Industry Overview — A Year of Recovery
2025 marked the strongest year for new light-vehicle sales since 2019, with 16.2 million units sold across 16,990 franchised dealerships. Total industry revenue reached $1.3 trillion, up 4.5% year-over-year, with growth distributed across new vehicle, used vehicle, and fixed operations departments.
The average dealership generated $76.6 million in total revenue — a record — driven by normalized inventories, resilient consumer demand, and a continued shift toward higher-priced light trucks (now 83% of all new sales). The EV landscape was shaken by the federal tax credit expiration in September, which created a demand spike followed by a sharp BEV market share decline from 11.8% to 5.9%.
After the COVID-era dip in 2020, the industry has achieved five consecutive years of growth. The 2025 figure represents the highest total ever, surpassing pre-pandemic peaks by over 25%.
Revenue Composition — Where the Money Comes From
The revenue split remained remarkably stable year-over-year: new vehicles at 54.9%, used vehicles at 31.8%, and service & parts at 13.3%. This consistency masks important margin dynamics that differ sharply between metro and rural markets.
Urban dealers face higher floorplan costs on new inventory but benefit from volume-based manufacturer incentives. With average selling prices at $48,205 for new, metro dealers may see more price sensitivity as consumers comparison-shop easily across nearby stores.
Rural dealers typically enjoy less same-brand competition and stronger customer loyalty. The 13.3% from service & parts can represent a disproportionately higher share of gross profit — critical for rural stores with fewer unit sales but deeper customer relationships.
New-Vehicle Department — Trucks Dominate
Light trucks now represent 83% of all new vehicle sales — up from 69% just seven years ago. The average retail selling price hit $48,205, continuing an unbroken upward trend. The average dealer sold 955 new units in 2025, with 114 retail units per salesperson.
Truck-Heavy Mix Favors Rural Dealers
Rural markets have always over-indexed on truck purchases. With trucks at 83% nationally, rural Ford, GM, and Stellantis stores are naturally aligned with demand. This mix also drives higher average transaction prices and often better F&I penetration on accessories like bed liners, tow packages, and protection products.
Inventory Days' Supply Pressure
Domestic brands carried 47 days' supply vs. 41 for imports at year-end. In competitive metro markets where multiple same-brand stores exist, excess supply creates pricing pressure. With 2.58 million total units on the ground, metro dealers must be surgical with inventory management to protect margin.
Toyota lost 0.8 points — the largest decline of any manufacturer. Hyundai gained 0.6 points, continuing its rapid growth. VW surged 0.7 points. Stellantis lost 0.4 points as its brand portfolio continues to struggle. For Ford dealerships specifically, the 0.5-point loss means increased competition for every unit — particularly relevant in rural markets where Ford has historically been dominant.
Used-Vehicle Department — Stabilizing Prices
Franchised dealers sold 13.1 million used vehicles in 2025, up from 12.8 million the prior year. Average retail price landed at $28,680 — down from the $30,736 pandemic peak but still well above pre-2020 levels. Trade-ins on new vehicles remained the dominant sourcing channel at 45.4%.
Street Purchases & Trade Retention
Rural dealers have a natural advantage in street purchases (9.1% nationally) — less competition from Carvana, CarMax, and other metro-focused buyers. Strong CRM follow-up and targeted "we'll buy your car" campaigns can increase this channel significantly, building used inventory without auction fees.
Auction Cost Pressure
With 21.9% of used units coming from auctions, metro dealers face higher acquisition costs as digital auction platforms increase nationwide competition for desirable units. The key differentiator: managing reconditioning cost and speed-to-line to protect per-unit gross.
Service & Parts — The $164 Billion Engine
Total service and parts sales hit $164.6 billion — a new record. The average dealership generated $9.7 million in fixed ops revenue, wrote 16,252 repair orders, and employed 16 technicians. The average customer mechanical labor rate reached $186/hour.
| Category | Service Labor | Parts Sales |
|---|---|---|
| Customer Mechanical | $31.48B | $24.21B |
| Customer Body | $4.63B | $4.14B |
| Warranty | $15.46B | $16.67B |
| Internal | $12.22B | $8.55B |
| Other / Wholesale | $11.01B | $39.86B |
| Total | $75.81B | $93.42B |
Fixed Ops Is the Rural Profit Center
For rural dealerships selling 300–500 new units, fixed operations often generates 60%+ of total gross profit. With $494 average revenue per customer RO and fewer independent shop competitors, rural dealers should invest aggressively in service marketing, online scheduling, and technician retention. The $186/hr average labor rate provides pricing power headroom in markets with limited alternatives.
Express Service Declining — A Concern
Only 47.8% of dealers now offer express service, down from 51.9% in 2022. In metro markets where Jiffy Lube, Valvoline, and Tire Rack compete for maintenance traffic, dropping express service is risky. Metro dealers should protect this lane as a customer retention and conquest tool.
Advertising — Digital Dominance at $10 Billion
Total dealership advertising spend hit $9.96 billion — effectively $10 billion — with an average of $586,246 per store and $739 per new unit sold. Digital channels now command approximately 75% of the budget: SEM (21.1%), third-party listings (20%), SEO (19.5%), and social media (14.2%).
In competitive metro markets, the $586K average is likely a floor — top-performing urban stores spend $800K+. SEM and third-party listing costs are higher due to keyword competition. The key differentiator is conversion rate optimization: driving more leads per dollar rather than just more impressions. Metro stores should also lean into social media (14.2%) given the audience density.
Rural dealers can often achieve dominance with $300K–$400K in total spend if allocated wisely. The ROI on SEM in low-competition markets can be exceptional — lower CPCs, less same-brand competition, and broader geo-targeting. Radio (6.9% nationally) and direct mail (5.6%) still carry outsized weight in rural communities where personal relationships and local presence matter.
Employment — 1.1 Million Strong
The industry employed 1,123,100 people across all dealerships, with an average of 65 employees per store. Average weekly earnings nationally were $1,619. Technicians represent the largest workforce segment at 25.2%, followed by other service/parts employees at 23.7%.
With only 16 technicians per dealership nationally and 278,424 techs across the industry, the shortage remains the single biggest operational constraint. Metro dealers compete with independent shops, Amazon delivery jobs, and higher cost of living for the same talent pool. Rural dealers face a smaller candidate pool but can offer lower living costs, less commute stress, and often stronger community ties. Both markets need to invest in apprenticeship pipelines and competitive compensation — the $186/hr labor rate provides room to pay technicians more and still maintain margin.
| State | Dealers | Avg Revenue | Avg Employees | Avg Weekly Pay | Avg Payroll |
|---|---|---|---|---|---|
| Texas | 1,285 | $108.4M | 85 | $1,733 | $7.64M |
| Florida | 953 | $129.0M | 95 | $1,739 | $8.58M |
| California | 1,334 | $115.0M | 83 | $1,864 | $8.06M |
| Wisconsin | 464 | $45.6M | 51 | $1,332 | $3.56M |
| Iowa | 261 | $41.1M | 49 | $1,408 | $3.58M |
| Wyoming | 47 | $43.9M | 40 | $1,352 | $2.11M |
| National Avg | — | $76.6M | 65 | $1,619 | $5.61M |
The contrast is stark: Florida dealerships average $129M in revenue with 95 employees, while Wisconsin stores average $45.6M with 51 employees. This isn't a quality gap — it reflects market density, population, and the metro/rural split. Wisconsin's lower payroll ($3.56M vs. national $5.61M) is both a cost advantage and a reflection of the smaller teams that rural markets require.
Consumer Financing — Affordability Under Pressure
The average new-vehicle amount financed reached $43,582 in Q4 2025, with monthly payments at $767 over 68.9 months. Used-vehicle financing averaged $27,528 at $537/month. Interest rates held at 6.4% new and 11.3% used. Leasing stayed flat at about 24.4% of new transactions.
$767/Month Is a Pain Point
At nearly $800/month for a new vehicle, payment shock is real. Loan terms are stretching — 29.6% of new loans are now 73–84 months, up from 26% a year ago. For both metro and rural dealers, F&I product penetration and desking strategy must account for payment-sensitive consumers. Credit unions gained share (10.5%), suggesting consumers are rate-shopping more aggressively.
Captive Finance Still Dominates at 54%
Manufacturer captive lenders hold 54% of new-vehicle financing but lost nearly 4 points from Q4 2024 (57.9%). Banks gained to 27.4%. This shift matters for F&I income — captive programs typically offer dealers reserve and flat fees that non-captive lenders may not match. Rural dealers with fewer lending partners are particularly exposed to this trend.
Consolidation Trends — Larger Groups Growing
The share of owners operating 1–5 dealerships fell from 94.4% in 2016 to 90.5% in 2025 — a steady decline that signals accelerating consolidation. Groups running 6+ stores now represent 9.5% of all owners, up from 5.6% a decade ago.
| Group Size | 2016 | 2025 | Change |
|---|---|---|---|
| 1–5 stores | 94.4% | 90.5% | -3.9 pts |
| 6–10 stores | 3.8% | 5.9% | +2.1 pts |
| 11–25 stores | 1.5% | 2.8% | +1.3 pts |
| 26–50 stores | 0.1% | 0.6% | +0.5 pts |
| 50+ stores | 0.1% | 0.2% | +0.1 pts |
Metro markets are the primary acquisition targets for expanding groups. Larger groups bring centralized BDC operations, bulk vendor pricing, and shared back-office functions that create cost advantages. Independent metro dealers must differentiate on customer experience, speed, and local marketing execution to compete with group-owned neighbors.
Rural stores are also acquisition targets — but for different reasons. Groups value them for geographic coverage and brand exclusivity (often the only franchise point for 50+ miles). Independent rural owners should view this as both a succession planning opportunity and a competitive reality: investment in facilities, processes, and talent is essential whether you plan to grow or eventually sell.
Strategic Takeaways for 2026
Defend Used-Vehicle Margin
With used prices stabilizing around $28.7K and acquisition competition fierce, metro dealers should focus on trade retention, reconditioning speed, and digital merchandising. Every day a unit sits costs money — aim for sub-30-day turn in metro markets.
Double Down on Fixed Operations
With $9.7M average fixed ops revenue and fewer independent competitors, rural dealers should invest in service marketing, online scheduling, recall campaigns, and technician recruitment. Fixed ops is the profit backstop when vehicle margins compress.
Optimize Digital Ad Spend
At $586K average per store, advertising is a major line item. SEM and third-party listings alone consume $241K. Dealers should ruthlessly track cost-per-lead by channel and shift budget toward the highest-converting sources monthly — not quarterly.
EV Tax Credit Fallout
BEV share cratered from 11.8% to 5.9% after the tax credit expired. Dealers with EV inventory need aggressive turn strategies. The 51% franchised dealer BEV market share shows the franchise model is viable for EVs — but only when incentives align.
Address Payment Shock in F&I
With $767/month new payments and 29.6% of loans stretching past 72 months, F&I teams must lead with payment-based selling and protection products that reduce total cost of ownership. Menu presentation and transparent disclosure build trust and penetration.
Prepare for Continued Consolidation
The 1–5 store owner segment shrank by nearly 4 points over a decade. Independent metro dealers should evaluate whether to invest for long-term independence or position for a strategic exit. Either path requires strong financials and operational discipline.