U.S. car dealership consolidation accelerates as small family dealers sell to larger groups

Derek Sylvester's father built the family's original Chevrolet dealership on Main Street in rural Peckville, Pennsylvania, in 1972.

The store and family had been a pillar of the village outside Scranton ever since. That changed late last month, when Sylvester and his family closed a deal to sell Sylvester Chevrolet to New York-based Matthews Auto Group.

"As a family, we decided this might be the time," said Sylvester, 67, who has been contemplating retirement. "Unless you're a larger store, a much larger store, it's a little bit harder to make money. ... It's just scale."

Many of Sylvester's family members plan to continue working at the dealership, but he said they did not feel they were in a position to keep running the business amid the rapidly changing automotive retail landscape in the U.S. The industry is dealing with the uneven adoption of all-electric vehicles, technological shifts such as artificial intelligence, and growing demands from automakers.

Sales of dealerships such as Sylvester Chevrolet are taking place across the country at a rapid pace as the business of selling cars, once seen as the domain of mom-and-pop shops, has evolved into a lucrative trillion-dollar industry marked by consolidation and growing attention from Wall Street and investors.

The National Automobile Dealers Association, or NADA, says the vast majority of U.S. franchised dealers are still small business owners with fewer than six stores. But the country's top retailers have grown significantly.

The top 150 dealers sold 27% of all retail and fleet new vehicles in 2025, up from 24.3% in 2021 and 21.2% in 2015, according to Automotive News' annual ranking of top automotive retailers. They also owned roughly a quarter of dealerships last year, up from less than 20% a decade earlier, the trade publication said.

Top publicly traded dealers such as Lithia Motors and AutoNation now have market capitalizations of more than $6 billion each. Online used-car retailer Carvana, whose $74 billion market value exceeds that of most automakers whose vehicles it sells, has also started quietly buying new vehicle franchises without disclosing its future plans.

"There's a lot of money that wants to come to the industry," Brian Gordon, president of dealer adviser and broker Dave Cantin Group, told CNBC. "And, generally, the industry is sort of aligned on how to value these things. That makes for a good climate for [mergers and acquisitions]."

Multibillion-dollar dealership groups have been rising amid a decadeslong consolidation trend that has created a grow-or-die mentality for many U.S. automotive retailers.

NADA says the average dealership owner has between two and three stores, but the largest growth area over the past decade has been medium-sized dealership groups with six to 25 stores.

NADA reports that 90.5% of its nearly 17,000 dealers own between one and five stores, down from 94.4% in 2016. Meanwhile, 0.2% of dealers own 50 stores or more, up from 0.1% over the same period.

"It's clear that it's a consolidating industry, and it's an industry that is going to continue to consolidate," Gordon said. He added that this is happening at every level, especially as mom-and-pop shops expand into larger players.

Dave Cantin Group, which advised Matthews Auto Group on the acquisition of Sylvester Chevrolet, handles dozens of such deals each year and expects the pace of consolidation and mergers and acquisitions to keep increasing this year.

Matthews Auto Group is one of many regional dealership companies that has chosen to expand. The family-owned company started in Vestal, New York, in 1973 with a single Chrysler-Plymouth store and has grown into a roughly $800 million business with 18 locations and 800 employees.

Rob Matthews, second-generation owner and CEO of Matthews Auto Group, said the company's growth strategy is ongoing and is intended to improve profitability and competitiveness in its markets of New York and Pennsylvania.

"I think that's certainly a competitive advantage. I think staying still is probably not the best play. You're seeing continued scale," Matthews said. "The trend is you're just going to continue to see consolidation to allow you to stay competitive."

Sylvester said that was also why he wanted to sell his business, with conditions related to keeping the store's dozens of employees, something Matthews said fits the company's acquisition strategy.

"There's a lot of things that, because of our scale, we see we can really unlock a store like his," Matthews said. "I think, honestly, it's exciting in the sense that we're just looking to give them more tools and hopefully let everyone work going forward."

Wall Street has also taken notice of how lucrative and protected franchised dealerships are in the U.S. The franchised dealer system, which exists to sell new vehicles to consumers rather than allowing automakers to sell directly, is unusual and heavily regulated.

"I think there's endless upside. The opportunity for growth in our company is just endless," Sonic Automotive President Jeff Dyke told CNBC in a recent interview. "I think having mom-and-pop dealers is really good for the business. The thing is, the mom-and-pop dealer is going to have to advance their thinking."

Sonic Automotive, a publicly traded company with a market capitalization of more than $2 billion, grew from 96 franchised dealership stores in 2015 to 134 at the end of last year. It also significantly expanded its EchoPark used-vehicle stores and Sonic Powersports. The company's revenue rose 58% over that period to $15.2 billion last year.

Others, such as Lithia Motors, have been even more aggressive. The Medford, Oregon-based company surpassed AutoNation in 2022 to become the top U.S. new-vehicle franchised dealer.

Lithia, with a $6.3 billion market capitalization, increased revenue from $8.7 billion in 2016 to $37.6 billion last year. The company nearly tripled its new and used stores from 154 locations to 455 over that span.

John Murphy, a longtime automotive analyst and managing director of strategic advisory at buy-sell advisory firm Haig Partners, said dealerships remain an extremely lucrative market for investors, even after profits normalized from elevated levels during the Covid pandemic.

"Structurally, there's some real potential upside, and there is an increasing level of attention by existing capital in the dealership community as it stands right now from outside players, private equity family offices, other pools of capital on this limited number of dealers and finite number of dealers," he said. "The earnings upside is increasing and there's increasing attention, or demand, on the buy side of the equation."

Taken together, those factors have left many mom-and-pop dealerships vulnerable to acquisition or under pressure to expand.

"There's just so many factors that make competition for a small mom-and-pop dealership more difficult," said Talon Fee, a managing director at Dave Cantin Group who led the sale of Sylvester Chevrolet to Matthews Auto Group. "It's not to say that small mom-and-pop dealerships can't continue to exist and thrive and survive, but they do need to have a plan."

Fee and others said the main reasons owners sell are a lack of succession planning, intensifying competition in a changing industry, and a lack of commitment to reinvest in the business.

"There's a lot of outside capital that's figured out how to come in, given the fact that you have to be an operator in order to get approved by a manufacturer," Gordon said.

The industry is also changing in other ways, as newer automakers such as Tesla, Rivian and Lucid try to bypass the franchised dealer model and sell vehicles directly to consumers.

Those companies have repeatedly challenged state laws governing such sales. Rivian recently won a fight with car dealers in Washington state by threatening to take its case to voters through a ballot measure that would permit direct sales.

The shift adds to the evolving U.S. automotive retail landscape that owners such as Sylvester and his wife, who also worked at the dealership, did not have to navigate in the past. It is also something Sylvester and many other smaller dealership owners will no longer have to compete with after selling their businesses.

"I lived a great life, don't get me wrong. But, hey, good things come to an end," said Sylvester, who plans to spend retirement caring for a 92-acre farm in Pennsylvania. "We made a good living. You know, we helped the community out."