Why car dealerships are a 'hedged' business
The auto industry is cyclical, but one segment of it seems to be far more resilient to downturns: the auto dealer. Parts and service departments are responsible for about half a dealership’s profits, and finance and insurance arms can contribute nearly a quarter. Now that the affluent car buyer is showing signs of weakness, dealers are leaning more on profits and finance and insurance to drive profits. Here’s why that has worked for them in the past, and why it may be challenged in the future.
The auto industry is cyclical, but one segment of it seems to be far more resilient to downturns: the auto dealer. Parts and service departments are responsible for about half a dealership’s profits, and finance and insurance arms can contribute nearly a quarter. Now that the affluent car buyer is showing signs of weakness, dealers are leaning more on profits and finance and insurance to drive profits. Here’s why that has worked for them in the past, and why it may be challenged in the future.
What's Your Reaction?
