Dealers pivot to service as car-sale profits retreat post-pandemic
With new-car margins shrinking, U.S. dealerships are leaning on service departments, especially oil changes, to sustain earnings.
As the surge in vehicle-sale profits from the early 2020s eases, dealers are turning to service bays to shore up declining margins. Tim Pohanka, executive vice president and chief operating officer of Pohanka Nissan Hyundai, says the shrinking profitability of car sales makes service the "biggest opportunity." Data show service and parts sales have jumped 48% in five years, hitting $164.6 billion in the most recent year, while the average age of passenger cars rose to 14.5 years, extending the service window.
To win business from independent chains, dealers now offer walk-in appointments, financing for repairs, and video documentation of each service. The strategy also aims to lock in future car buyers, as customers who service at a dealership are more likely to purchase a new vehicle there. Average pretax profit for public dealers fell from $6.8 million in 2022 to about $3.9 million in 2025, underscoring the need for this shift.
Why it matters
Dealers' focus on service affects car-owner costs and the profitability of a major U.S. industry.
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