Automotive dealerships 2007–19: profit-margin compression and product innovation

From the 2007–09 Great Recession to the onset of the coronavirus disease 2019 pandemic, the new-vehicle market in the United States changed significantly. Consumer and producer price trends examined in this article show how dealers’ profits on new vehicles declined and, subsequently, how dealers successfully expanded financial services to improve revenue and profit. New-vehicle production and sales are important to the U.S. economy. Vehicle dealerships are the primary intermediary between consumers and manufacturers in the new-vehicle supply chain. From 2007 to 2009, these dealerships, facing declining profits from vehicle sales, adjusted their business models to increase revenues from other lines of business, especially finance and insurance (F&I). The automotive market started to change during the 2007–09 Great Recession, when profit margins on new-vehicle sales began declining. Subsequently, dealerships expanded offerings of financial products to offset reduced profit margins in vehicle sales. The volume of these services steadily increased, reaching record levels by the end of 2019.