New Car Dealers (United States) — NAICS 441110

An investor's primer. NAICS (the North American Industry Classification System) code 441110 covers establishments primarily engaged in retailing new automobiles and light trucks — sedans, SUVs, pickups, and passenger and cargo vans — usually alongside used vehicles, financing, parts, and repair.

1. Overview

A new car dealer is the storefront where a factory-built vehicle meets a retail buyer. Under U.S. law, almost every new car and light truck from a traditional automaker is sold through an independently owned, franchised dealership — not by the manufacturer directly. That legal structure makes new car dealers one of the largest and most stable retail industries in the country: roughly 17,000 franchised dealers sold about 16.2 million new vehicles in 2025, and retail buyers spent on the order of $620 billion on new vehicles that year [1].

The business matters to investors for three reasons. First, scale: dealerships are the single largest category of retail sales in the U.S. by dollars. Second, the model is more resilient than it looks — a dealer earns roughly half its gross profit not from selling cars but from servicing them and from arranging financing and insurance, income that holds up even when new-car sales slump [2]. Third, the industry is extraordinarily fragmented and slowly consolidating, which gives the larger operators a long runway to buy up smaller ones.

There are two very different ways in. A handful of large dealer groups trade on public stock exchanges, so anyone can own a slice of the industry through common shares. But the vast majority of the industry is private — family-owned single stores and privately held multi-store groups — so the more direct private route is buying, building, or lending against a dealership itself, an active market with its own specialist advisors. The central question in either route is not raw vehicle volume; it is whether an operator can convert vehicle sales into durable cash flow through finance, parts, service, disciplined inventory, and strong local market position.

2. What it is and how it's structured

Scope. NAICS 441110 is the retail sale of new cars and light trucks [3]. In practice these are franchised dealers: a dealer signs a franchise agreement with an automaker — the OEM (original equipment manufacturer, i.e., the carmaker) — giving it the right to sell that brand's new vehicles and perform warranty service in a defined market area. A single "rooftop" (one location) typically bundles four businesses under one roof: new-vehicle sales, used-vehicle sales, a finance-and-insurance (F&I) office, and a service-and-parts operation (often with a collision/body shop).

The industry is organized around:

• Franchised dealerships — independently owned stores operating under OEM agreements; the bulk of the industry.
• Dealer groups — companies that own many stores across multiple brands and markets.
• Fixed operations — the service, parts, collision, and warranty side of each store (so called because the work is recurring and less tied to the sales cycle).

What it excludes. Several adjacent activities sit in their own NAICS codes and are not counted here:

• Used Car Dealers — 441120 (used-only lots, plus the large used-car retailers CarMax and Carvana).
• Recreational Vehicle Dealers — 441210, and Boat / Motorcycle / ATV and other motor-vehicle dealers — 441222 / 441227.
• Automotive Parts and Accessories Retailers — 441330 and Tire Dealers — 441340.
• Automotive repair — NAICS 8111 (independent, non-dealer service shops).
• Automakers themselves (vehicle manufacturing, NAICS 3361–3363). Direct-selling manufacturers such as Tesla, Rivian, and Lucid sell their own cars without franchised dealers, so those retail sales fall outside 441110.

Ownership mix. Overwhelmingly private and franchise-bound. An OEM must approve who owns each franchise, which keeps ownership local and family-dominated even as consolidation advances. Publicly traded groups and large privately held groups together control a growing but still minority share of stores; the long tail is thousands of single- or few-store operators. (The federal data below do not publish a public-versus-private or franchised-versus-independent split — that structure is qualitative.)

3. How big it is

Federal business statistics for NAICS 441110 (our ground-truth figures):

A few things to read from these figures. The Census receipts of $1.19 trillion count everything a new-car dealership sells — new vehicles, used vehicles, parts, and service — which is why the number dwarfs the ~$620 billion consumers spent on new vehicles alone in 2025 [1][4]. There are more establishments (21,910) than firms (17,242) because the larger dealer groups run many locations under one company [4][5].

On the undercount caveat. County Business Patterns and the Economic Census count employer businesses (those with paid employees) and exclude nonemployer sole proprietors [5][7]. That exclusion bites hardest in industries dominated by tiny gig operators; it is largely immaterial here, because new-car dealerships are payroll-intensive and captured well by federal statistics. As a cross-check, the Census firm count (~17,242) lines up closely with the National Automobile Dealers Association (NADA) tally of roughly 16,900 franchised light-vehicle rooftops; NADA, counting franchised dealers only, reported more than $1.3 trillion of total dealership sales in 2025 — a narrower, more recent cut that is not directly comparable to the Census NAICS universe [1][2]. The one real quirk is a labeling one: the Small Business Administration (SBA) treats any dealer with 200 or fewer employees as a "small business," yet the typical franchised store employs around 65 people [8] and rings up tens of millions of dollars in annual sales. So on paper most dealerships are "small businesses" — an artifact of the size standard, not a sign the data misses the industry.

4. The investable universe

Public companies. Six franchised auto retailers trade on U.S. exchanges; they are the pure or near-pure ways to own the industry in public markets. None is a strict 441110 pure-play — each combines new-vehicle franchises with used vehicles, F&I, and service. Approximate scale below is full-year 2025 revenue (which includes used vehicles, F&I, and service, not just new cars):

Major private and other owners. The bigger story is private. Hendrick Automotive Group is the largest privately held dealer group, with roughly $14.5 billion in 2025 revenue and more than 210,000 vehicles sold [15]. Berkshire Hathaway Automotive (owned by Berkshire Hathaway, tickers BRK.A / BRK.B) runs more than 80 dealerships — a way to own dealerships indirectly, though it is a tiny fraction of Berkshire [16]. Other large private groups include Ken Garff, Morgan Auto Group, Holman, Victory Automotive Group, and Swickard. In aggregate, the 150 largest dealer groups sold about 4.4 million new and fleet vehicles in 2025 — roughly 27% of the market — leaving the majority with independent operators [17].

Adjacent, not in-scope. CarMax (KMX) and Carvana (CVNA) are used-vehicle retailers (NAICS 441120). Tesla (TSLA), Rivian (RIVN), and Lucid (LCID) sell direct as manufacturers. They compete for the same customer but sit outside 441110.

5. How the money works

A new car dealer is best understood as four profit centers — and, counterintuitively, the showroom is the least profitable of them. Using the industry's standard department breakdown [2][18]:

• New vehicles are the majority of a dealership's sales but only about a quarter of its gross profit. Margins on the metal are thin: the dealer buys near invoice, sells near a transaction price the manufacturer heavily influences, and competes on price with every other dealer of the same brand. Reported profit also includes manufacturer incentives and volume bonuses. In late 2025, the public groups averaged roughly $3,000–$3,300 of gross profit per new vehicle retailed ("GPU," gross profit per unit) — down sharply from the 2021–2022 inventory-shortage peak, when scarce supply let dealers sell at or above sticker [18].
• Used vehicles are a large share of sales and a similar share of gross profit; profitability turns on trade-in sourcing, appraisal accuracy, reconditioning cost, pricing, and how fast the lot turns.
• Finance and insurance (F&I) is the high-margin add-on desk: arranging the auto loan or lease (and keeping a slice of the interest markup) and selling extended service contracts, GAP (guaranteed asset protection) coverage, and prepaid maintenance. F&I income runs on the order of $1,600–$2,500 per vehicle and is nearly pure profit [2][18].
• Fixed operations (service, parts, and collision) is the profit engine. It is a modest share of sales but roughly half of total gross profit, because labor and parts carry high margins and demand recurs — warranty work, maintenance, and repairs keep coming regardless of the sales cycle.

The metric that ties this together is service absorption: fixed-operations gross profit divided by the store's total overhead. At 100% absorption, the service and parts departments alone cover the dealership's entire overhead, so every dollar of vehicle gross profit falls toward the bottom line [19]. Owners also watch GPU on new and used, F&I income per unit, inventory turn and days' supply, and floorplan cost — the interest on the short-term loans dealers use to finance vehicles sitting on the lot, a cost that rises with interest rates and with aging inventory.

Net margins are thin at the store level — commonly 1–3% of sales — but on tens of millions of revenue per rooftop that still produced average per-store profit well above pre-pandemic levels through 2025, even as it normalized down from the 2021–2022 highs [1][20]. Industry-wide, total retailer profit from new vehicles was about $29.9 billion in 2025 [1].

6. What drives demand

New-vehicle demand is cyclical and rate-sensitive. The main levers:

• Affordability and financing. Most buyers finance, so the monthly payment — a function of price, down payment, and interest rate — governs demand. Average new-vehicle transaction prices crossed $50,000 for the first time in late 2025 [21], and average new-car loan rates sat near 6.7–6.8% [22]. When rates fall, buying picks up; negative equity on trade-ins and tighter credit push buyers toward used vehicles or delay purchases.
• The macro cycle. A vehicle is a big-ticket discretionary purchase, so sales track employment, consumer confidence, and credit availability. Volumes swing from the low-teen millions in recessions to ~16–17 million in good years. Federal Reserve consumer-credit data (the G.19 release) show how loan rates, maturities, and amounts financed shift over the cycle, underscoring the industry's sensitivity to both rates and credit quality [23].
• Fleet age and replacement. The average vehicle on U.S. roads reached a record ~12.8 years in 2025 [24]. An aging fleet is a tailwind for eventual new-car replacement and — right now — for the service bays.
• Manufacturer supply and incentives. Dealers can only sell what the OEM ships. Inventory levels, factory rebates, and subsidized financing all move showroom traffic.
• Product and powertrain mix. Trucks, SUVs, and luxury vehicles carry different margins than economy cars. Battery-electric vehicles (EVs) were roughly 6–8% of new sales and are dominated by direct-selling brands: Tesla alone held about 46% of the U.S. EV market in 2025 [25] — volume that largely bypasses franchised dealers.
• Fleet, commercial, and government purchases, plus local factors such as regional population growth and weather.

Over a full cycle, replacement demand and recurring service revenue provide resilience, but new-vehicle affordability remains the main swing factor. EV adoption is a two-sided force — new models and service capability on one side; uncertainty over product mix, residual values, charging, and future repair economics on the other.

7. Regulation

New car dealers are among the most legally protected retailers in America, and that protection is the industry's defining feature. Rules come from three layers — state, federal, and the manufacturer.

• State franchise (dealer-protection) laws. All 50 states regulate the manufacturer-dealer relationship and govern dealer licensing, franchise agreements, store locations, advertising, fees, and title work. In most states, automakers are barred from selling new vehicles directly to consumers and must sell through independent franchised dealers; the laws also restrict an OEM's ability to terminate, relocate, or add competing franchises. This is what forces GM, Ford, Toyota, and the rest to sell through dealers rather than company stores.
• Direct-sales fights. Tesla and other EV makers have battled these laws for over a decade. Roughly 17 states expressly ban direct manufacturer sales while about 18 expressly allow them, often through narrow carve-outs tailored to manufacturers with no existing franchisees [26]. The outcome shapes whether the franchise model survives the EV transition intact.
• Manufacturer requirements. Beyond the law, OEMs impose brand, facility, training, customer-satisfaction, inventory, and reporting standards on franchisees as a condition of the agreement.
• Federal consumer-protection rules. Dealers must follow the Federal Trade Commission (FTC) Used Car Rule and its Buyers Guide disclosure [27], the FTC Safeguards Rule protecting customer financial data [28], and federal Truth in Lending and Equal Credit Opportunity (fair-lending) requirements. The FTC's 2024 CARS Rule (Combating Auto Retail Scams), aimed at hidden fees and bait-and-switch add-ons, was vacated by the Fifth Circuit Court of Appeals in January 2025 on procedural grounds after a challenge by NADA and the Texas Automobile Dealers Association [29]; the FTC then formally removed it from its rules, effective February 2026 [30]. It is not in force — but scrutiny of F&I markups, add-on products, and documentation fees continues at the state and federal level.
• Safety and emissions. The National Highway Traffic Safety Administration (NHTSA) regulates vehicle safety and recalls [31], and the Environmental Protection Agency (EPA) regulates vehicle emissions [32]; both affect inventory, warranty work, service capacity, and vehicle mix.

Forward-looking: the durability of state franchise laws against the direct-sales and "agency model" push (where the dealer becomes a fee-based delivery agent rather than the seller of record) is the single biggest regulatory question hanging over the industry's long-term structure.

8. Competitive dynamics and consolidation

This is a genuinely fragmented industry. Federal concentration data for 2022 show the four largest firms held just 8.4% of receipts, the top eight 12.7%, the top 20 16.4%, and the top 50 20.5%; the Herfindahl-Hirschman Index (HHI, a standard concentration gauge where 10,000 is a monopoly) was a mere 25.4 — about as un-concentrated as any large industry gets [4].

That fragmentation is the investment thesis for the big operators: with thousands of independent stores and a steady supply of retiring owners, the public groups and large privates can grow for years simply by acquiring. Scale brings real advantages — centralized advertising and purchasing, shared finance and inventory systems, technician training, data, and compliance capacity — while local advantages (convenience, service access, reputation, brand availability) keep individual stores relevant. Consolidation has been steady but slow: franchise laws give OEMs a veto over ownership transfers, and even the six public companies combined are a modest slice of the ~$1 trillion industry. In 2025 private buyers were actually the more active acquirers of individual stores, and the top 150 groups still commanded only ~27% of new-vehicle volume [17]. The buy-sell market — where whole dealerships and groups change hands at "blue sky" multiples of earnings — is the primary arena of competition among the consolidators, tracked by specialist advisors such as Kerrigan Advisors and Haig Partners. The best targets are not simply the largest stores but those combining scarce franchise rights, strong local brands, high service retention, favorable real estate, and manageable inventory and debt.

9. Risks

• Cyclicality and interest rates. Big-ticket, financed purchases fall in downturns and when rates rise; higher rates also raise the dealer's own floorplan financing cost on unsold inventory.
• Margin normalization. The extraordinary 2021–2022 profits came from an inventory shortage. As supply normalized, new-vehicle GPU fell back toward historical levels, pressuring the reported earnings of the public groups [18][20].
• The EV / direct-sales threat. If more manufacturers win the right to sell direct — or shift to an agency model where the dealer becomes a fee-based delivery agent — the franchise system that underpins dealer profits could erode. Today's direct-selling EV brands already capture volume outside the dealer channel [25][26].
• OEM dependence. A dealer lives and dies by its brands' product, allocation, and incentive decisions; a weak lineup or a manufacturer's financial trouble hits the franchisee directly.
• Inventory risk. Used-vehicle values can fall quickly, forcing markdowns and stranded floorplan interest on aged units.
• Regulatory and litigation risk. F&I markups, add-on products, deceptive advertising, discriminatory financing, and privacy breaches remain targets for regulators and plaintiffs even after the CARS Rule was struck down [29].
• Labor. Skilled-technician shortages can cap service capacity and constrain the most defensive profit center.
• Tariffs and input costs. The 25% tariffs on imported vehicles and parts introduced in 2025 raised vehicle costs by an estimated $2,000–$6,000-plus per affected vehicle, pressuring affordability and demand [33].
• Acquisition and integration risk. Consolidators can overpay for "blue sky," add leverage, or fail to integrate acquired stores.
• Real estate. Dealerships require valuable sites; owners carry construction, lease, zoning, and environmental exposure.
• Technology-vendor concentration. The June 2024 ransomware attack on CDK Global — the dominant dealer management software provider — knocked out operations at roughly 15,000 dealerships for weeks, a stark reminder of the industry's reliance on a few shared software platforms [34].

10. How to invest, and the outlook

Public routes. The direct public play is the six franchised retailers (LAD, PAG, AN, GPI, ABG, SAH). Historically these have been capital-efficient, cash-generative businesses that return a lot of cash through share buybacks (Lithia and Penske also pay dividends), and they have typically traded at low valuation multiples — often high-single-digit to low-teens price-to-earnings — reflecting the market's view that dealer earnings are cyclical. Berkshire Hathaway (BRK.B) offers indirect, heavily diluted exposure through its automotive division. Because headline revenue is dominated by low-margin new-car sales, judge these companies on operating quality, not the top line — watch:

• same-store new- and used-vehicle units, and gross profit per unit (GPU);
• F&I gross profit per vehicle and product penetration;
• service and parts growth, technician productivity, and service absorption (the resilient lines);
• inventory age, days' supply, and floorplan expense;
• OEM, brand, and geographic concentration;
• acquisition returns, goodwill, leverage, and free cash flow — and valuation across the cycle (price-to-earnings, enterprise value to EBITDA, and free-cash-flow yield).

Private routes. Because most of the industry is private, the more direct exposure is owning the asset: buying an existing rooftop or group (subject to OEM approval), developing dealership real estate and leasing it back to operators, or providing floorplan and acquisition financing. Entry requires manufacturer sign-off and meaningful capital, and value is set in the active buy-sell market at blue-sky multiples that rise and fall with dealer profitability. Diligence should emphasize normalized earnings, service retention, inventory aging, franchise-renewal terms, floorplan financing, real estate ownership, environmental liabilities, owner compensation, and the depth of the management team.

Outlook. U.S. new-car dealerships are mature but durable businesses. Analysts expect new-vehicle sales to run near a 16-million-unit annual pace, with the direction hinging on interest rates, affordability at record-high prices, and the trajectory of 2025's tariffs [1][21][33]. Regardless of the sales cycle, the durable parts of the model — service, parts, and F&I — plus a still-fragmented market that rewards the consolidators, are why investors keep finding the industry attractive. The long-term opportunity is more likely to come from operational improvement and consolidation than from fast underlying volume growth. The open-ended question is structural: how much of the franchised model survives the shift to electric vehicles and manufacturers' recurring push to sell direct.

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Sources

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