9 Car Dealership Industry Financial Statistics: Sales, Expenses, Profit and More

May 2, 2023

Adam Hoeksema

The IRS publishes tax return data each year on the roughly 28,000,000 sole proprietorships in the U.S. We analyzed the 133,895 tax returns that were filed in the car dealership industry to pull out some key statistics and insights to help our customers ensure that they are creating realistic financial projections for their car dealership.  

We hope that this data will be helpful for you as a “reality check” for your financial projections and car dealership business planning process.  We hope you create a forecast for your unique situation and plan, and then use this data to make sure your projections seem reasonable based on industry averages.   

Here is what we will cover in this article:

Learn How to Use this Financial Data

If you are creating projections for your startup business, or you just want to see how your existing business stacks up to industry averages, you can take your income statement and compare key ratios and percentages for your business compared to this industry average data. 

How many Car Dealership businesses in the US are sole proprietorships

There are approximately 133,000 car dealership businesses in the US organized as sole proprietorships.  We specifically analyzed 133,895 companies based on the 2019 IRS tax return data. 

Average annual revenue for a Car Dealership

The average annual revenue for all sole proprietorship car dealership businesses in the U.S. was just $291,564.  

This number seemed incredibly low to me.  In fact, in our blog post How to Start a car dealership we found that the average car dealership revenue was $4 million per year and sell roughly 120 vehicles per year

So what gives?  

I think we need to remember that this tax return data includes all sole proprietors that categorize themselves in the “Used car dealership”.  This may include those that sell a couple cars in their front yard.

This underscores the importance of actually creating your own car dealership projections based on your potential inventory.  

Average annual expenses for a Car Dealership

The average annual expenses for all sole proprietorship car dealership businesses in the U.S. was $289,606.  

It should jump out to you immediately that average annual expenses for a car dealership is likely around 10 to 11 cars, assuming $25,000 per car, plus salaries, so again let’s not focus too much on the specific dollar amounts here, what we can gain from this tax return data is an understanding of expenses and profits as a percentage of revenue rather than a specific dollar amount. 

Average net profit margin for a Car Dealership business

The average net profit margin for a car dealership business was 1%.

How much can I make by owning a Car Dealership business? 

In order to calculate the earnings potential of a car dealership you can take the following assumptions:

  • # of walk in visitors to the lot
  • % close rate of visitor to car buyer
  • Average sales price per car

These assumptions will allow you to come up with a revenue forecast for your car dealership.  From there you can apply the 1% profit margin.

Top 9 expenses for a Car Dealership business

Based on the tax returns of roughly 130,000 sole proprietors operating in the car dealership industry, the following were the 9 largest business expenses as a percentage of revenue.

Expense as a % of Revenue Category
78% Material Costs - COGS
4% Other business expenses
4% Salary and Wages + Contract Labor
2% Labor Costs - COGS
2% Rent paid on other business property
1% Car and Truck Expenses
1% Depreciation
1% Taxes Paid
1% Utilities

Average material costs expense for a Car Dealership business

The average car dealership business spent 78% of annual revenue on material costs.  

Given that a majority of the cost is spent on inventory, this large percentage is not surprising.  Used car inventory is the main driver of revenue, so it would be accurate that the majority of cost resides in this category.

Average salary and labor expense for a Car Dealership 

The average sole proprietor car dealership business spent roughly 4% of annual revenue on Salaries and Labor expenses and another 2% on Labor Costs - COGS.  

In addition to inventory, salary and labor is the second most common cost. It requires people to find and purchase inventory, inspect and repair vehicles, and generate new sales.

Average rent expense for a Car Dealership 

The average sole proprietor car dealership company spent roughly 2% of annual revenue on rent.  

Depending on the size of the property, this expense could vary.  Given the definition of Used Car Sole proprietorship varies, this number is likely to be higher for prime real estate.  

Average utility cost for a Car Dealership 

The average car dealership spent roughly 1% of annual revenue on utilities.  

Important Details about the Data

I want to point out a few key items about the data:

  • You can download this data for free from the IRS website
  • The data includes 133,895 car dealership sole proprietorships in the U.S. in 2019.  
  • This data will include businesses that operate full time, and businesses that only operate on a part time basis. 
  • Because of this, you should take the raw numbers for revenue, expenses and profit with a grain of salt, but the percentages can still be quite valuable when trying to forecast expenses for your business.  
  • This data includes businesses from all across the country, keep in mind that revenue and expenses can vary greatly based on your specific geographic location. 
  • We used 2019 data because we felt it was most likely to be representative of a “normal” environment for the industry.  COVID-19 caused disruption to almost every business in 2020 and 2021, so we wanted to utilize “normalized” data. 

If you have any questions about the data or how to utilize the data in your financial forecasting process please don’t hesitate to reach out to us! 

About the Author

Adam is the Co-founder of ProjectionHub which helps entrepreneurs create financial projections for potential investors, lenders and internal business planning. Since 2012, over 50,000 entrepreneurs from around the world have used ProjectionHub to help create financial projections.

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