Automotive Trends Report

Dealership Performance and Profitability Trends

F&I PVR Still Ahead

F&I PVR continues to stay ahead following growth in the first quarter, while also maintaining year-over-year progress.

Our Take: We anticipate F&I PVR to hold steady or even grow through the remainder of the year. With key F&I performance metrics ahead YOY, it shows how customers are seeing the value in protection products especially as prices from ownership, maintenance and insurance costs inflate.

F&I PVR

Front PVR Declines YOY, Increases Quarter to Quarter

Front PVR is still down YOY. As we continue to see the cost of a new vehicle rise due to inflation and tariffs (averaging more than $45,000 according to Global Data and J.D. Power), elevated prices will put more pressure on consumers, which could affect this metric through the latter half of 2025. Although front PVR continues to decline, a perspective to consider is that we're still seeing front PVR levels twice that of 2019.

FRONT PVR

Our Take: Profitability eroded in May and June, in part due to less demand for vehicles and therefore less gross. Inventory may rise, causing a downfall in demand and increasing competition among dealerships. Focusing on providing the best customer experience will be the way to differentiate yourself in a high-inventory market.

F&I PVR and Front PVR Quarterly Results Increase

From a month-to-month perspective we saw a significant decline in Front PVR for two months out of the quarter. But because of the steep rise in demand at the start of Q2, overall, Q2 front PVR is ahead quarter to quarter.

F&I PVR VS. Front PVR Quarterly Percent Change

Vehicles/F&I/Front PVR First Half of 2025

Our Take: In our last report, we discussed how a bump in sales could take place in Q2 as consumers look to purchase vehicles before tariff-related price increases. Demand proved strong. However, we anticipate this growth to slow as more OEMs raise prices to offset increased costs, interest rates persist and macroeconomic conditions continue to affect household budgets.

Vehicle Service Contracts on An Upward Trajectory

From April to June, vehicle service contract penetration increased quarter-to-quarter and YoY.

VEHICLE SERVICE CONTRACTS

Our Take: Consumers are unsure how the economy will respond to the impact of tariffs. We expect this overall sentiment to continue throughout the remainder of this year. As mentioned in our Q1 report, we’re optimistic about VSC penetration. As repair costs look to increase with the added presence of tariffs, your team can emphasize how F&I products can help hedge against inflation of costs associated with car ownership.

GAP Follows VSC Data

Trend lines follow a similar story for GAP. However, it’s interesting to note that we saw a slight decrease in VSC penetration month-to-month in June, but GAP was up throughout each month during the quarter.

GAP

Our Take: In our Q1 report, we incorrectly anticipated that GAP penetration would hold steady throughout the year. GAP penetration actually increased in Q2. Car buyers facing affordability issues and persistently high interest rates are financing for longer terms, which can contribute to negative equity on a loan, making GAP even more valuable.

Economic Factors Shaping Vehicle Sales

Interest Rates Lower Slightly

Consumers buying used vehicles experienced a small sign of relief over the past three months as the average used 72-month auto loan interest rate came in at 12.06 in June 2025, the lowest level this year. New vehicle loan rates experienced the opposite, ending higher overall in Q2 than in the previous quarter.

AVERAGE INTEREST RATES FOR 72-MONTH TERM

Our Take: As these rates continue to remain steady, we do not anticipate much fluctuation through the end of 2025. If The Fed drops interest rates, this will help customers who are price wary. However, we do not expect a large drop, if any, this year. Since interest rates continue to be a top customer concern, focus your strategy on products that can help increase retention and customer satisfaction, rather than reserve, which can hold a greater risk for refinancing down the line. Product sales benefit the customer by enhancing their experience, helping to protect against unexpected expenses and hedging against inflation, while also providing convenience and security.

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New and Used Ratio Show Inventory Pressure

New vehicle penetration has stayed above January levels, when it dipped following a 61% high in December. Accordingly, the percentage of used vehicle sales has dropped since January.

NEW/USED DEAL %

Our Take: Cox Automotive reported a decrease in the used-vehicle inventory levels, lowering to 2.21 million units on June 2^nd. Depending on the effects of tariffs on pricing, we may see more shoppers faced with affordability concerns pushed into the used car market, putting additional pressure on used inventory.

Finance Type Deal Percent Remains Balanced

The percentage of lease, finance and cash deals has remained stable over the last 18 months.

Our Take: Despite a long period of stability, dealers will be keeping an eye on this area. The car interest tax credit will not apply to lease vehicles, so this may draw some would-be lease customers (interested in taking advantage of the credit) into the finance market.

FINANCE TYPE DEAL PERCENT

Q2 Product Income Sees Growth Over Reserve Since 2023

When looking at the second quarter performance since 2023, we see a drop in finance reserve share of income. Interestingly, both 2024 and 2025 have the same rates.

Product Income vs. Finance Reserve

Our Take: As the new auto loan interest deduction from the recent Fed bill receives more attention, this is an opportunity for you to encourage your team to educate themselves and support good customer service to help better retain your guests for future needs.

SAAR Declines After March High

The SAAR dropped from a 17.8 million high at the end of the first quarter, to a 15.2 million low at the end of the second quarter. In our last report, we honed in on the sentiment that tariffs are bringing heightened unpredictability to certain metrics throughout the year. We saw demand pull ahead in the beginning of Q2 and key performance metrics increase along with it. If tariffs have a significant impact on vehicle prices, this could drive new car sales down, potentially prompting OEMs to increase incentives.

SAAR

Top Trending News

How To Sell EVs Once the Tax Deduction is Eliminated

EVs have been riding a selling wave over the past few years, in part due to increased production but most likely as a response to beneficial tax cuts. Consumers, looking for affordability where they can, adopted this powertrain when the monthly costs, especially with leases, were shockingly low. With the elimination of the $7,500 benefit coming up in September, including an end to a loophole that drove many customers to lease EVs, we may see a decrease in overall lease penetration. What will selling look like when EV monthly payments are possibly pricier than their ICE counterparts?

Tip: Now is the time to ‘beef up’ your sales associates’ product knowledge of the electric vehicles that your dealership sells. Pay extra attention to EV unit leads by reinforcing sales processes and ensuring sales management teams are maximizing opportunities through EV customer turnovers. We may see manufacturers make an effort to compensate for the lost incentive, or individual states continue to incentivize EVs. Regardless, knowing your team is equipped to sell both ICE and EVs to your consumers ensures your dealership is ready to meet consumers with varying buying interests and needs.

What The Tax-Deductible Auto Loan Interest Means For You

We expect customers to be excited about the recently signed law requiring no tax on car loan interest (for qualified vehicles and buyers) from 2025-2028. This could make financing more attractive to typical lease or cash customers, since there's no related benefit for lease or cash customers. It’s crucial that your dealership is prepared to support customer inquiries and concerns.

Tip: Sales associates and finance managers who understand the details can serve as better consultants to their customers. A smart move is to make sure your sales associates are well-versed in which cars on the lot are eligible and which are not. Being a better consultant in this matter can help close deals, convert cash customers, and sell more service contracts. Salespeople should be aware of limitations surrounding income, time frame and unit eligibility.

Dealership Strategy for 2025

"Dealerships aiming to win big in 2025 need to stay nimble and keep customer experience front and center. With new-vehicle sales projected at 16.3 million and used-car retail around 20.1 million, smart inventory choices are key—especially leaning into hybrids, which are picking up steam as EV adoption faces hurdles. Most buyers still love the in-person dealership vibe, but many kick off their search online, so your digital presence has to flow seamlessly into the showroom. Ensuring you have the right CRM to drive customer interaction online is key! And with a recent Cox Automotive study suggesting 65% of customers would transact partially or fully online thru the sales process, dealers who are first to adapt in their market with this option will be a step ahead.

Right now, tariffs and high interest rates are hitting customers’ wallets hard, making affordability a real pain point. That’s where Vehicle Service Contracts (VSCs) and prepaid maintenance plans shine—they’re a lifeline for buyers, locking in predictable costs and shielding them from budget busting repairs or maintenance down the road, while driving retention. F&I should have consultative conversations focused on building trust and loyalty. Plus, don’t sleep on your service department—ramping up fixed ops can drive steady revenue and keep customers coming back, no matter how wild the market gets."

Paul Brady
Area Sales Director Lead
JM&A Group

Preparing For Dealership Success This Year

As we enter the last half of the year, the industry continues to face uncertainty around tariffs, pricing and parts. Though a major impact on pricing hasn’t been widely seen in the last quarter, manufacturers like Toyota have already announced an increase will occur on their vehicles. Knowing that your consumers will continue to face affordability challenges in the next few months, remember to stick to the basics and invest in training and upskilling opportunities for your sales team to help your dealership prepare for any headwinds that may come.