Automotive Trends Report

Dealership Performance and Profitability Trends

F&I PVR Passes Highest Level Since Q2 2022

During the 4^th quarter, F&I PVR reached its highest point since Q2 2022, followed by a typical year-end dip in December as overall focus sometimes weighs heavier towards moving units at year-end. The prior year showed a similar pattern.

Front PVR Softens in Q4

Front PVR declined in the final quarter, ending at a more than 5-year-low in the month of December.

Our Take: As consumers continue to face affordability pressures, both dealerships and customers benefit when sales teams adapt to each customer’s unique needs. Aligning sales processes to support a consultative approach helps associates guide customers toward decisions that best fit their budget, lifestyle, and long-term goals. This begins with vehicle selection and carries through financing terms and product options. Be empathetic with customers and aim for a buying experience that makes them feel valued and supported throughout the full lifecycle of their vehicle.

F&I PVR Increases While Front PVR Declines

Since Q1 2024, F&I PVR has remained relatively stable, with continued gains through the end of 2025. In Q4 2025, F&I PVR finished the year up 3.6% quarter over quarter. Front PVR followed a different trajectory, peaking in Q2 amid pre-tariff purchasing activity and declining through the second half of the year, including a further decrease in Q4.

Our Take: As front-end margins remain under pressure, the continued strength and stability of F&I performance underscores its role as a key contributor to overall dealership profitability. In a market shaped by affordability constraints and shifting buying behavior, F&I remains an important lever for balancing tighter vehicle margins while supporting a customer-focused sales experience. It's very important that every customer receives a great F&I process. See how other dealers are finding efficiencies in reaching customers.

Vehicle Service Contract Penetration Increased YOY

Vehicle Service Contract penetration reached a year-high in November, followed by a decline in December. Despite the year-end dip, penetration trended higher across most of 2025 and finished the year ahead of 2024 levels in nearly every month.

Our Take: As vehicle prices and ownership costs remain elevated, Vehicle Service Contracts continue to play an important role in helping consumers manage vehicle expenses. The overall strength in VSC penetration through most of 2025 reinforces the value customers place on protection and cost predictability. This is especially true in an environment where affordability remains top of mind. For dealers, consistent VSC performance supports both customer satisfaction and profitability amid ongoing market uncertainty.

GAP and Products Per Deal Remain Elevated Despite Year-End Fluctuations

Although both GAP penetration and Products Per Deal fluctuated throughout the year, performance remained consistently ahead of 2024 levels. Despite some softening toward the end of Q4, these trends reflect sustained customer interest in protection and ownership-related products as affordability remains top of mind.

Despite a seasonal dip in PPD, during the month of December, PPD came in ahead YOY in Q4 of 2025.

Economic Factors Shaping Vehicle Sales

Interest Rates Continue a Slow Decline

Both new and used vehicles saw a decline in average interest rates over the final quarter of 2025, though new-vehicle 72-month rates began to tick up slightly in the last weeks of the year. While auto loan rates remain elevated relative to pre-pandemic levels, they finished 2025 at their lowest point since 2022.

Our Take: While the path forward for tariffs remains uncertain, affordability pressures continue to shape consumer behavior across vehicle pricing, interest rates, insurance, and maintenance costs. In response, manufacturers may lean more heavily on incentives as one lever to support demand in 2026. With OEMs absorbing a significant portion of tariff-related costs last year, additional cost pressures could emerge this year, though how those costs are ultimately passed through to consumers remains to be seen.

New Vehicle Share Increases During Year-End Sales Push

The share of new vehicle sales increased in the final quarter of 2025, finishing December just slightly below the same period last year. The year-end lift was supported by dealer sales pushes, OEM-supported advertising, and incentives aimed at closing out the calendar year.

Our Take: The continued split in buying behavior reflects a growing K-shaped economy. With some typically new car buyers moving into the used car market, are you stocking the correct used car inventory, do you have the right financing options, are you positioning yourself to help these customers? Success in this environment requires adapting to each buyer’s priorities, whether that means convenience, monthly payment sensitivity, or long-term ownership considerations, and helping customers make decisions that best fit their individual needs and lifestyles.

NEW/USED DEAL %

Lease Penetration Begins to Recover at Year-End

Lease penetration reached a year low in October and November following the expiration of the EV tax credit in September, which had previously encouraged leasing activity. As the quarter progressed, lease share began to increase in December. Over the same period, cash deals declined while finance penetration increased.

Our Take: As leasing activity resumes, dealers can expect an increase in newer used vehicles entering the market over the coming years, including one- to four-year-old vehicles returning from lease. Preparing now with a clear intake, reconditioning, and resale strategy will position dealerships to capture this opportunity. Success will depend on having the right mix of certified programs, product offerings, and lender relationships to support customers transitioning out of leases and into their next vehicle.

FINANCE TYPE DEAL PERCENT

Product Income and Finance Reserve Portions Remain Stable

Product Income and Finance Reserve remained close, year over year in Q4.

Our Take: In our Q3 report, we mentioned that as interest rates decline, many owners who signed retail installment agreements at higher rates will be looking to refinance. With a product to reserve income ratio that favors product, dealers can help minimize the risk of chargebacks while providing a customer experience that promotes retention.

Product Income vs. Finance Reserve

SAAR Trend

March 2025 marked the highest SAAR level of the year. After easing from the spring peak, SAAR fluctuated throughout 2025 before finishing the year at approximately 16.2 million units.

Our Take: Vehicle prices remain elevated, yet demand persists. Despite higher monthly payments, customers are prioritizing car ownership, underscoring its importance in their lives. Your team plays a critical role in helping connect customers with their next vehicle. With strong inventory, competition among dealerships is high and the service you provide sets your team apart. Your customer experience is increasingly important to maintaining retention and profitability.

SAAR

Top Trending News

Electric Vehicle Adoption Slows, But Dealership Teams Should Stay Vigilant

A significant drop in EV adoption occurred in the last few weeks of 2025 once the EV credit ended in September, and dealers are still seeing slow adoption. Even though some OEMs are pulling back on EV production, these vehicles will not disappear. During this transition phase, continue to train your sales team to have the product knowledge needed to meet customers interested in EVs. We anticipate hybrid adoption increasing, as a soft bridge between ICE and EVs. With that, we can expect consumer knowledge and experience around EVs to continue to grow over the next few years.

Artificial Intelligence for Dealerships in 2026

As the number of AI startups tailored to the automotive industry continues to rise, it’s important for dealers to cut through the noise. Invest the time needed into learning and understanding what specific challenges you are trying to solve for at your dealership to avoid acquiring a new tool that may not pertain to your performance goals or integrate into the dealership process you have today. Create a clear implementation plan for any tool that you plan to introduce. We anticipate an increase in usage of AI tools in sales and service this year, which will help boost efficiencies in the experience you bring to your customers.