New car boom, used car squeeze—and the future of fixed-ops

3 big takeaways from the 2025 NADA Show

Hey, everyone — Got some positive news for your Thursday morning—according to Edmunds, the average APRs for both new (6.6%) and used (10.8%) cars hit their lowest points in almost two years.

Looks like car buyers are getting a (little) break right before tax refund season really starts to pick up steam.

—CDG

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20 years ago—Clive Humby came up with the phrase “data is the new oil.” And it stuck—because just like oil fueled the last industrial revolution, data is powering this one. 

More than ever before—savvy auto dealers are using market analysis, forecasts, and customer data to make real-time investments that build businesses, economies, and livelihoods.

And after connecting with operational leaders at last week’s NADA Show— I’ve narrowed down three massive forces shaping the auto retailing outlook.

1. Long-term new car inventory growth will push dealers to find new efficiencies.

For the first time since the pandemic—new vehicle inventory crossed 3 million units in October 2024. And while a strong month of sales in December brought supply levels slightly down—inventory is still up 18% year-over-year.

Jonathan Smoke
Cox Automotive

But here’s the thing—Cox Automotive Chief Economist Jonathan Smoke said on the NADA Live Stage that over the course of this year—inventory will be relatively stable and “not increase much more.”

The reason? As automakers try to regain their full manufacturing strength—the Trump Administration will likely make major policy changes. Meaning—automakers probably won’t gamble with an aggressive production push any time soon.

But the three-year outlook? Wildly different. 

At Auto Team America's annual buy-sell summit—Bank of America’s Managing Director John Murphy forecasted a peak annual sales pace of 18 million units by 2028. That’s ~1 million more units than pre-pandemic (when new car margins were more compressed).

Dealer POV: Damian Mills, owner of Mills Automotive Group is starting to feel margin compression creeping in already.

At the summit—he said the plan for his 23 stores is to improve throughput and sales velocity by leveraging data-driven automations to “constantly and consistently market to that low funnel client.”

Aka, convert more customers from the dealership’s database into sales.

Damian Mills
Mills Automotive Group

(Apropos conversion, reminded me of my conversation from a couple of weeks prior with Tina Tasche, Head of Innovation and Tech at Van Horn Automotive Group. Tina is taking things up a notch by mining her own data to build “opportunity” lists of customers to target. Using third-party predictive analytics, she pinpoints the right people with precision. Then, it’s all about proactive outreach.)

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2. The return on investment for used cars is plunging.

One of the most insightful conversations I had at NADA was with Dale Pollak, founder of inventory management company vAuto, and he told me that when it comes to used car operations:

Dale Pollak
vAuto

“The greatest existential threat to our industry that is present, and not being talked about, is the decline of return on investment.”

Wait, what? Let me explain.

Used vehicle gross profits have settled back to 2019 levels, with public dealer groups averaging $1,600 per car—slightly above the $1,430 average from five years ago. 

But gross profit alone doesn’t tell the whole story.

ROI takes into account how much a dealer invested in a vehicle, how long it took to sell, and how much money it made when it sold.

And according to Dale, the average annualized ROI for a used car that sold in 45 days has gone from 135.6% in 2019 down to 82.9% in 2024.

The problem? Dealers are paying way more to acquire inventory while supply is tight, but front-end profits haven’t kept up.

But Dale’s idea is to stop managing used cars with a traditional mindset and instead—make data-driven decisions for the best financial returns.

Take appraisals—dealers often decide a car’s worth based on market demand or what it takes to outbid competitors. But an investment manager would first consider the expected ROI, factoring in holding costs, market depreciation, and exit strategies before committing capital. 

The same logic applies to acquisitions and pricing—decisions should be driven by data, not just gut instinct.

In fact—more tech integrations and data-powered AI platforms are connecting dealership departments in new, straightforward ways…

3. Dealers are strengthening the pipeline between sales and service.

The great thing about fixed operations? It keeps the dealership lights on. 

And with positive new and used car sales forecasts for 2025—smoothing out the between sales and service will be key for retention.

Let’s say a customer buys a new car. Everyone is happy, the sales team celebrates... But does that customer ever come back for service? 

Too often, the answer is no. The sales department moves on, the service team has no idea the car was even sold, and the customer eventually ends up at Jiffy Lube.

So—what are the solutions?

Skyler Chadwick, Director of Product Consulting at Cox Automotive, told me on the NADA Show floor that it’s coming down to—you guessed it… data.

Skyler Chadwick
Cox Automotive

  • As soon as a car is sold, the customer’s data can now flow straight into the service system.

  • Their first maintenance visit is pre-scheduled, and the customer gets a friendly reminder to show up.

  • And when that customer’s repair bill starts to hit “might as well trade it in” territory, AI can flag them in the system and send the lead back over to sales.

No more silos. No more customers falling through the cracks. 

But will data-powered insights and automated integrations be the endgame for dealerships? Time will ultimately decide. However—-today’s dealers are leveraging data in ways beyond the obvious, like using machine learning to analyze consumer sentiment on social media and create hyper-personalized ads.

The biggest takeaway? The dealers challenging outdated processes today are defining the next phase of the market—and that’s good for the industry and consumers.

If you made it to the NADA Show this year—what was your top lesson learned? Hit Reply and let me know.

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—Car Dealership Guy

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