At Dave Cantin Group (DCG), we analyze the latest public earnings reports every quarter, providing the most relevant insights to help dealers stay ahead of market trends. This quarter, we’re focusing on three critical themes: the luxury vehicle market, fixed operations growth, and the evolving used vehicle market. These insights are essential for dealers thinking about their own business strategies, mergers, and valuations.
1. The Luxury Vehicle Market: Cooling Headlines, Stable Reality
Luxury vehicle sales declined approximately 10% year over year in Q4 2024, which, at first glance, might suggest that demand is cooling. However, this headline misses the real story.
The dynamic is more distortion than deterioration. Q4 2024 and H1 2025 benefited from significant pull-forward demand, as consumers accelerated purchases ahead of administration change, tariff uncertainty, and the expiration of EV-related incentives. That created an unusually high bar for 2025, especially in premium luxury.
“Sales in this year’s fourth quarter were negatively impacted by the strong pull-ahead earlier in the year as consumers reacted to tariff announcements and purchased vehicles prior to the expiration of government incentives for electric-related powertrains,” said Michael M. Manley, CEO of AutoNation. “We felt these impacts across most brands with the biggest impact in premium luxury.”
Despite the decline, Q4 still ranks among the strongest luxury volume quarters of the past eight, with sequential improvements from Q3 showing that demand hasn’t disappeared—it’s simply shifted in timing. As inventories normalize and margin pressure increases, the real question isn’t whether luxury demand exists; it’s whether the segment remains insulated in an increasingly K-shaped economy.
Key Takeaway: Luxury demand cooled comparatively in Q4, but the story is more distortion than deterioration. Administration change expectations, tariff headlines, and expiring EV incentives pulled forward premium purchases, creating a tougher comparison rather than a true demand breakdown.
2. Fixed Ops: Carrying More of the Load — and Earning It
Parts and service continue to grow their share of total gross profit, now consistently exceeding the mid-40% range across the publics. This underscores how central fixed ops has become to the earnings mix, and this shift hasn’t happened by accident.
“Fixed ops continues to be the bedrock and foundation of the profitability of the business,” said Rich Shearing, COO of Penske Automotive Group.
Sustaining that mix has required greater discipline and improved service margins across nearly all public dealer groups. As front-end margins compress and pricing power weakens, fixed ops is increasingly being asked to replace lost gross, not just stabilize earnings.
The next phase of outperformance will favor operators focused on the back end of the business: continued investment in people, technology, and processes to elevate customer experience, increase throughput, and capture a growing share of service demand from an aging and more complex car parc.
Key Takeaway: As parts and service grow beyond roughly 45% of total gross for the publics, sustaining that mix requires margin discipline. With front-end margins compressed, fixed ops is no longer a hedge; it’s the engine replacing lost gross.
3. The Pre-Owned Opportunity: Growing Inventory, Growing Pressure
The used vehicle market is moving toward a more normalized inventory environment, with lease maturities expected to improve in 2026. While this shift presents growth opportunities, it also brings renewed pricing pressure. Dealers are now tasked with sourcing the right vehicles at the right price and turn profile to protect margins and avoid elevated days’ supply.
“We believe the opportunity to improve used inventory availability will be in the second half of the year as lease turn-ins start to come in, allowing us to pull the volume lever while maintaining discipline on gross profit per unit,” said Bryan DeBoer, CEO of Lithia.
Used vehicles remain a critical affordability solution for consumers priced out of the new-car market and continue to be a powerful driver of gross profit and long-term fixed operations growth. The next cycle will reward disciplined operators with strong consumer sourcing strategies, market intelligence, and process rigor. As pre-owned day supply remains below historical averages, the winners will be those who can maintain it as supply returns.
Key Takeaway: As used supply normalizes in 2026, the advantage shifts to disciplined operators. The opportunity isn’t just more inventory, it’s smarter sourcing, faster turns, and margin protection.
DCG’s Role in Helping Dealers Navigate These Trends
Each of these insights has a direct impact on mergers, acquisitions, and valuations within the dealership space. At DCG, our analysts are continuously evaluating how these trends will affect dealership operations and valuation. As part of our ongoing commitment to dealership success, we help you understand and adapt to these shifts, enabling you to leverage market changes for growth.
By following these quarterly insights, you’ll be better equipped to make informed decisions and keep your dealership ahead of the curve. Stay tuned for more updates and insights as we continue to monitor the industry’s evolving landscape.