I asked 3 top dealers what’s keeping them up at night...

Hey, everyone. “Waymos be wildin” is not a headline I thought I read this week… but here we are.

For the past few days, Waymo’s autonomous vehicle fleet has erupted into a nightly parking lot honk-a-thon for no apparent reason – and it’s driving residents nuts.

The Alphabet-owned company issued a patch to quickly fix the issue.

Until a 24-hour livestream called LoFi Waymo Hip Hop Radio Self Driving Taxi Depot Shenanigans To Relax/Study To surfaced – prompting another patch. 

Only in San Francisco…

—CDG

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Wonder what keeps the country’s top car dealers up at night? After talking with several dealers that do billions in annual sales and run a combined 75+ stores, I uncovered 3 key operational realities to watch in the back half of the year.

Here’s what we talked about.

1. Customer pay work is harder to come by in service.

Customer pay work at a car dealership refers to repairs or services performed on a vehicle not covered by warranty. It's typically more lucrative than warranty work because customers pay out of pocket for their repairs while warranty work is subsidized by a fixed rate from the automaker.

The stat that jumped out to me: Cox Auto says dealership service visits dropped from 35% in 2021 to 30% in 2023, while general repair shops gained market share and became the preferred choice for vehicle owners.

Why? Cost. The average price per service has almost doubled since 2021.

For the dealers I spoke to, remaining price competitive is top of mind, especially as vehicles age and are no longer under warranty.

But that’s not always easy. Dealer service departments often have higher overhead, which translates to steeper labor rates compared to independent shops. The tradeoff? Consumers are typically getting specialized expertise, genuine parts, and the peace of mind that comes with an OEM-authorized service center. It’s the dealer’s job to make sure car owners see the value in that.

The reality: Many consumers think they will get overcharged by dealerships, and trust is declining as a result.

To keep their customer pay business steady—or even grow it—dealers are going back to basics. They’re casting a wider net, targeting “all makes and models” to pull in off-brand vehicles that might otherwise head to independent shops. The dealers I’ve talked to are leveraging loyalty programs and extended service plans to push everything from routine tire maintenance and oil changes to more complex repairs.

2. Growing inventory and poor brand management (across certain makes).

Dealerships across the board are seeing a pile-up of certain brands and models, leading to bulging inventories and holding costs.

By the numbers: As of Aug. 1, the average dealership new car days' supply (the number of days it would take to sell all vehicles in inventory) was 68 days.

But the dealers I spoke to say that a 45-day average across the industry is a more ideal number.

How do we get there? Manufacturers will have to get even more aggressive with their incentives.

Or else, dealers will further sacrifice their profitability to discounting.

Case in point: Stellantis (Chrysler, Dodge, Jeep, Ram) has found itself in a messy combination of a poor pricing strategy and allocation.

One prominent dealer in the Southeast told me he was forced to take a year's worth of Chargers and is selling them for $3,000-$4,000 behind triple net (dealer speak for selling vehicles below invoice price) to get rid of them.

It’s either that or suffer rising floorplan expenses (the interest paid on financed and unsold new car inventory).

Zooming out: new car prices have to come down meaningfully to move excess inventory. Either automakers or dealers will have to step up the discounts -- no such thing as a free lunch and all.

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3. Hiring talent in a challenged labor market.

The auto technician shortage continues to be a problem.

The high demand for repairs and maintenance is outpacing the available supply of qualified technicians. The U.S. is on track to see a shortage of 642,000 auto technicians by 2024.

Why the lack of techs? Perception and pay.

According to the Bureau of Labor Statistics, the average hourly wage for an auto technician is $22 -- tough to live on in most parts of the country. And not exactly an enticing offer for the next generation of workers.

But, this statistic can be a bit misleading. A wide variety of jobs fall under the umbrella of "auto technician." Depending on the brand, region, and specialty, the earning potential could be substantially more. For example, some diesel technicians make north of $80,000 annually.

Rob is right, the problem is, young people today aren't as aware of that fact given the emphasis placed on 4-year college degrees over vocational (trade) programs.

Yet, with tuition costs and student debt soaring, enrollment in vocational community colleges increased 16% from 2022 to 2023.

Many dealerships are looking to these community college training programs as a source of future auto technician jobs, like this Indiana dealership group.

Pro-tip: At the prior company I founded, we needed to hire lots of auto techs and tried everything from sign-on bonuses, posting online, benefits, offering perks, etc…nothing really moved the needle. Until I adopted a new method: “Referral Brainstorm Meetings.” I’d meet one-on-one with our top techs to brainstorm everyone they’d ever worked with, and as soon as they remembered someone talented, they’d reach out that same day to share the opportunity. The best technicians I ever hired came through this pipeline.

Oh, before I forget: For dealers who are in acquisition mode, the buy-sell market is facing a growing disconnect.

Their big concern? Ensuring they don’t overpay for future revenue. Dealerships are being valued based on inflated COVID-era profits that no longer hold up. According to dealership buy-sell advisory firm Haig Partners, sellers still want valuations based on the pandemic boom years (which comes as no surprise), but buyers are now focused on future profits, which are projected to be lower.

This is what dealers are thinking about as they consider how to close out the year on a high note. But what's keeping you up at night? Hit reply and tell me more.

Electric vehicle dealer: Why the EV mandate should end now!
From PhD to millions of dollars worth of Teslas sold, Alex Lawrence, CEO of EVAuto, is a top 10 used EV dealer nationwide. In this episode, I speak with Alex about his unique approach to selling EVs, why EV mandates should end, and how he decodes Elon to beat the market. Listen here.

Dealership expert: Best and worst franchises, what's next for the car market
580+ dealership transactions valued at $11 billion – Alan Haig’s pulse on the buy/sell market is unmatched. I recently spoke with Alan, the founder of Haig Partners, to discuss why dealerships are still selling at a record pace, the top franchises, and what’s coming down the pipeline. Stream it now.

Listen to the episodes here, and subscribe to the CDG Podcast on Apple, Spotify, or wherever else you get your podcasts. And thank you to Uber for Business, Cars Commerce, Auto Hauler Exchange, Private Auto, and CDK Global for making these episodes possible.

• Veros Credit is hiring 10 regional sales managers all across the country.

• Ron Marhofer needs to fill three dealership positions including sales, BDC, and F&I.

• Edmunds is looking for an account executive in Seattle.

Looking to hire? Add your roles today—it’s 100% free.

• Survey shows service departments can do more to secure trade-ins.

• 2025 ID Buzz EV will become VW's most expensive model in U.S.

• Dealers can expect higher super prime auto loan originations.

• Lucid will launch three new affordable EVs to challenge Tesla.

• Don’t fall for the fake parking ticket scam sweeping North America.

Thanks for reading. See you on the next edition…

—Car Dealership Guy

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