The first-quarter numbers for dealership performance this year look ugly.
By the numbers: According to the Presidio-NCM Average Dealership Performance Benchmark released April 21, net pretax profit for the average U.S. franchised dealership fell 11.2% YOY, new-vehicle sales dropped 8.9%, and every brand saw compressed margins.
But it's not all bad news, Jason Stein, managing director at The Presidio Group, said during an accompanying webinar about the report.
"March of last year marked the highest new vehicle revenue month in history," Stein said. "And there's that payback."
In other words: The decline is largely a comparison problem because last year's tariff-driven buying frenzy created a baseline that this quarter couldn't match.
It's what dealers do next that matters, Stein and Kevin Tynan, director of research at Presidio, said during the online talk.
What they mean: Tynan said that the market is shifting from replace to repair, and dealers who reposition now will fare best.
"We did a 16.3 million unit new vehicle market in 2025," Tynan said. "As we start to see volumes come down, you're going to see more of the repair."
Used-vehicle margins face a structural squeeze, Tynan said, thanks to competitors such as Carvana and CarMax driving up acquisition prices.
"You throw those two 800-pound gorillas into the room, and they're bidding up because they need inventory," Tynan said. "That puts pressure on the individual dealer on the ground to bid up for that vehicle as well."
Fixed ops grew just 1.4% in Q1, down from 5.6% the prior year, according to the report. But Tynan called that a timing lag.
"The underpinnings for the fundamentals of fixed ops are there," Tynan said. "We just haven't seen it yet."
On recalls: Tynan flagged them as a continued driver for fixed ops.
"We're not going to see fewer of them, and we're not going to see that population of recall vehicles decline anytime soon, if ever," he said.
With that, Tynan suggested two moves: Increase tech training and consider mobile service options.
"If you can take some of that service out of the bay, that's an increase in capacity without adding a whole lot of additional cost," Tynan said.
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Regarding expenses: Fixed ops generated 53.8% of total dealership gross profit in the first quarter, the highest share ever recorded in the Presidio-NCM data set, according to the report.
That makes cost discipline more important, not less. Personnel costs rose to 40% of gross profit, up from 38.1% a year ago, and advertising spend climbed 7%, according to the report.
Tynan discussed AI as a longer-term lever on operating costs.
"Things like efficiency in scheduling, pricing, valuing a used vehicle; there's a lot of repetitive tasks that can be taken over by AI that can make people more efficient," Tynan said. "But people are going to be the key in this space for a long time."
Looking ahead: The next quarter will bring yet another tough comparison. April 2025 ran at a 17.5 million SAAR, Tynan said. However, Presidio recorded a record first quarter in completed M&A transactions, and the pipeline remains at record levels, Stein added.
"There's opportunity in this business," Tynan said. "It's just not coming from the traditional or from the headline segments."
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