Daniel Pilger & Brian Traugott on used cars, fixed ops, and dealer profits

Daniel Pilger and Brian Traugott break down key trends shaping dealer performance, from used-vehicle dynamics to fixed ops profitability and luxury sales cycles.

Drawing on recent public dealer earnings, the conversation highlights how shifting supply, affordability pressures, and margin compression are reshaping dealership strategy. Pilger and Traugott explain why used vehicles remain central to volume, how fixed operations are stabilizing profits, and what’s really happening in the luxury segment. They also emphasize the growing importance of disciplined execution, data-driven decision-making, and inventory management in a more normalized market environment.

•  Why used vehicles now drive the majority of dealership volume and affordability 
•  Rising used EV demand and the impact of incoming off-lease supply 
•  Fixed operations as a primary profit center amid front-end margin pressure 
•  The role of data and operational discipline in improving inventory turns and margins 
•  Understanding the recent dip in luxury sales and why demand remains resilient 
•  How dealers can position for growth through execution, efficiency, and market intelligence

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Transcript

Welcome And The Big Themes

SPEAKER_00 0:11

Hey everyone, Jim Fitzpatrick. Welcome into another edition of Inside Automotive right here at the CBT Automotive Network. Joining me today from the Dave Canton Group are Daniel Pilger, Vice President of Business Analysis, and Brian Trogett, who is one of the company's partners and chief of staff. They're here to break down uh some of the biggest themes emerging from recent uh public dealer earnings. We're talking about the used car market, fixed ops, performance, and luxury vehicle sales. Daniel and Brian, thank you both for joining me on the show today. Great to have you here.

SPEAKER_02 0:43

Great to be here, Jim.

SPEAKER_00 0:44

Sure. So yeah, thanks, Jim.

SPEAKER_01 0:46

We uh we really appreciate you having us on. We're excited to kind of share some of the big themes beyond kind of the numbers of the public dealer groups.

Used Cars Grow As Pricing Tightens

SPEAKER_00 0:52

Awesome. Awesome. So let's uh let's talk used cars. Daniel, uh your insight says that opportunity is growing, but uh so is the pressure. Walk us through that.

SPEAKER_02 1:02

Yeah, so used vehicles have always been and remain today an outsized portion of total industry sales. Currently, used vehicles are selling at about double the number of new vehicles. So the opportunity is absolutely real. One trend within the used market, counter to trends in new vehicles, is EV demand. Okay. Used electric sales have climbed 35% year over year, even as new EV momentum has slowed down 38% from a year ago. Wow. That gap tells a clear story. Consumers want or are willing to accept electric vehicles, but at used car prices. The supply side is only getting stronger as well, with lease returns projected to surge from about 120,000 units in 25 to roughly 650,000 by 2027. Oh my gosh. As lease maturities begin to improve in 26 and the supply starts to normalize, that brings pricing pressure. More inventory can sound good, but it means dealers have to be much more disciplined about what they buy, how they source it, and how quickly they turn it.

Smarter Sourcing And Faster Turns

SPEAKER_00 2:09

Sure. Brian, what separates the winners in the next phase of use in the used car market?

SPEAKER_01 2:16

Yeah, we hear it time and again on the recent earning calls. I mean, it's smarter sourcing and faster turns. Um, it's great that we're gonna have a lot more cars available and supply is gonna increase in the used car market. Um, but it's about having the right cars at the right price with the right turn profile to meet your customers' needs. Now, that's not earth-shattering, but you know, as we said, supply returns, dealers that rely on you know market intelligence, consumer sourcing strategies, and have a tight inventory discipline are going to be the best position in our minds to protect their margins and grow profitability. When the public dealer groups start leaning in harder into the used, pay attention. And then when you have OEM implemented platform level bets like Car Bravo, I at GM, it's confirmation, not coincidence, of the outside's importance on you know the success of the overall resale market.

SPEAKER_00 3:10

Yeah. Let's shift to uh fixed ops, Brian. One of the uh one of your biggest insights is that fixed ops is carrying more of the load. What are you seeing?

SPEAKER_01 3:20

Yeah, so fixed ops has become ever more central to the earnings story. Um, direct quote from Pennski COO Rich Shearing on the most recent earning call. Um, fixed ops continues to be the bedrock and foundation of the profitability of our business. And that's a sentiment mirrored by pretty much all of the leaders across the public. Um, parts and service now consistently contributing more than 45% of total gross profit across public dealer groups. Wow. And that matters because we all have heard the common trend around front-end margin compressions. So dealers need another part of the business to help stabilize earnings and replace lost growth. Um, fixed stops are just are doing just that. Um, but it's taken real discipline and sustained efforts of the public dealer groups um to really improve and focus their fixed op margins to be able to achieve that success.

SPEAKER_00 4:14

Daniel, uh you talk about discipline and use cards. What does that really look like at the dealership level?

SPEAKER_02 4:22

Yeah, when we talk about discipline, it means continued investment in people, process, technology, and facilities, whether that's upgraded equipment or added bays. The operators that are winning are the ones improving the customer experience, increasing throughput, and making service more efficient. With an aging car park and more complex vehicles on the road, the opportunity is definitely there. But dealers still have to execute. And I think an important distinction is that investing in new technologies and processes and executing on thin margins does not always mean chasing the newest trend. For a lot of dealers that are already operating on thin margins, it's important to remain disciplined and focus on the ROI that these technologies can bring. A key component of quantifying the ROI these investments might deliver is something we discussed heavily in our market outlook report. Knowing your customer. Become data dependent to best understand your customers and competitors because fixed ops is no longer just a safety net. It's a major growth and profitability driver.

SPEAKER_00 5:32

Let's talk luxury. The headlines suggest luxury vehicle sales cooled in Q4. Brian, is that a sign that demand is truly weakening?

SPEAKER_01 5:41

Not necessarily. At this time, um, for luxury dealers, it's something to keep an eye on. But our view in the public's was that it was most likely distortion versus deterioration. On the surface, naturally, a 10% year-over-year decline looks like softening in the space. But we believe the bigger picture here is timing. You had a Q4 in the first half of 2025 that benefited from outsized demand, from pull-ahead customers, from administration change expectations, tariff uncertainty, and then the expiring EV incentives, all which had an outside uh impact on the luxury brands versus the mainstream.

SPEAKER_00 6:19

Okay.

SPEAKER_01 6:19

So what we felt and maybe saw at the end of last year with that 10% decrease was less about luxury demand disappearing and more about purchases that we feel were accelerated earlier in the cycle.

SPEAKER_00 6:30

Sure, sure. What do you think dealers should take away from that?

Discipline And Fundamentals To Win

SPEAKER_02 6:33

To us, the key takeaway is that the luxury customer is still there. Q4 still ranked amongst one of the strongest luxury quarters we've seen in the last several years and was up year over or up quarter over quarter from Q3. This tells us it's not a collapse in demand. And the real question now is whether luxury can continue to stay insulated as inventory normalizes and margin pressure creeps in, especially in a more K-shaped economy.

SPEAKER_00 7:01

Sure. Brian, if you had to boil it all down, what's the common thread across these three trends?

SPEAKER_01 7:08

You heard us mention it a few times, but it really comes down to discipline in your day-to-day execution. And used vehicles, that's the opportunity with more and better availability of inventory, but that's risky. You need operators that are going to stay disciplined on sourcing and margin management that makes sense for their customers. And fixed ops, it's carrying a greater share of the profitability, but it's taking more of a focused effort on hard-earned margins to do it. You know, that's really something about taking advantage of scale, data, and the ability to test things out and make sure that you're going to get the right ROI. Something the publics have an advantage on over the smaller dealers and stores.

SPEAKER_00 7:46

Yeah.

SPEAKER_01 7:46

From an MA perspective, all dealers, whether they're looking to exit near term or long, should be considering how to maximize their value. And in an ever-evolving dynamics of this industry, if you're not at the forefront of these advancements and making the right bets with the right ROI, one of your competitors will be and their gains will be at your expense.

SPEAKER_00 8:05

Daniel, I'll give you the last word. What should dealers be focused on right now?

SPEAKER_02 8:09

Dealers should stay focused on the fundamentals. Demand is still there in key areas, but the environment is less forgiving and getting more so every day. The groups that continue to combine strong market intelligence with operational discipline will be the ones that outperform from here, Jim.

SPEAKER_00 8:25

Daniel Pilger and Brian Troget from the Dave Ken Group. Thanks so much for stopping by CBT News. Very much appreciate it.

SPEAKER_02 8:32

Thank you, Jim. Thanks for watching Inside Automotive with Jim Fitzpatrick.