‘It’s merely about scale’: Community-based car dealerships are either flourishing or fading away in the face of industry consolidation and the emergence of large retailers.

Derek Sylvester’s father established the family’s first Chevrolet dealership single-handedly on Main Street in rural Peckville, Pennsylvania, in 1972.

Since then, the store and family have been a cornerstone of the village, just outside Scranton. That was until late last month when Sylvester and his family finalized a transaction to sell Sylvester Chevrolet to a dealer group based in New York.

“As a family, we made the decision that this might be the right time,” said Sylvester, who at 67 has been considering retirement. “Unless you own a larger store, a significantly larger store, it can be somewhat challenging to generate profit. … It’s all about scale.”

Many of Sylvester’s family members intend to remain at the dealership, but he mentioned they did not feel equipped to continue leading the business given the rapidly transforming automotive retail landscape in the U.S. The industry is encountering a chaotic embrace of fully electric vehicles, technological advancements like artificial intelligence, and increasing pressures from automakers.

Sales of dealerships like Sylvester Chevrolet are happening nationwide at an astonishing rate, as the car sales business, once regarded as the domain of small family-owned shops, has morphed into a profitable trillion-dollar industry that has seen an influx of consolidation and heightened attention from Wall Street and investors in recent times.

While the National Automobile Dealers Association, or NADA, indicates that a vast majority of its U.S. franchised dealers are independent business owners like Sylvester with fewer than six locations, the leading retailers in the country have considerably expanded.

The top 150 dealers were responsible for 27% of all retail and fleet new vehicle sales in 2025, an increase from 24.3% in 2021 and 21.2% in 2015, according to Automotive News’ annual ranking of leading automotive retailers. They additionally controlled about a quarter of dealerships last year, rising from under 20% a decade prior, as stated by the trade publication.

At the same time, top publicly traded dealers such as Lithia Motors and AutoNation have escalated to market caps exceeding $6 billion each. Even online pre-owned vehicle retailer Carvana — boasting a $74 billion market cap, which exceeds the value of most automobile manufacturers it represents — has subtly begun acquiring new vehicle franchises without revealing its plans for the future.

“There’s a substantial amount of capital eager to enter the industry,” Brian Gordon, president of dealer advisory and brokerage Dave Cantin Group, informed CNBC. “Generally, the industry is somewhat unified on how to assess these assets. That fosters a favorable environment for [mergers and acquisitions].”

Multibillion-dollar dealerships have surged during a long-term consolidation that has instilled a grow-or-die mentality for numerous U.S. automotive retailers.

NADA, a trade organization representing franchised dealers, states that the average dealership owner operates between two and three stores, though the most significant growth sector over the last ten years has been in medium-sized dealerships that operate between six and 25 locations.

NADA reports that 90.5% of its nearly 17,000 dealers own between one and five stores, down from 94.4% in 2016. Conversely, 0.2% of dealers possess 50 stores or more, an increase from 0.1% during that same period.

“It’s evident that the industry is consolidating, and it’s an industry that will persist in consolidation,” Gordon remarked. However, he added that this is occurring at all tiers, particularly the transition of mom-and-pop operations to larger entities.

Dave Cantin Group — the advisor for Matthews Auto Group, the dealer group that acquired Sylvester Chevrolet — executes numerous such deals annually and predicts that the momentum of consolidation and mergers and acquisitions will rise this year.

Matthews Auto Group is among many regional dealership firms that have opted to expand. The family-owned business commenced in Vestal — located in central New York, south of Syracuse — in 1973 with a single Chrysler-Plymouth outlet and has since evolved into an approximate $800 million enterprise with 18 locations and 800 employees.

Rob Matthews, a second-generation owner and CEO of Matthews Auto Group, explained that the company’s pursuit of growth is ongoing, aiming to enhance profitability and better compete in its existing markets of New York and Pennsylvania.

“I believe that serves as a distinct competitive edge. Remaining static is likely not the wisest strategy. You are witnessing ongoing expansion,” Matthews stated. “The trend indicates that consolidation will persist to maintain competitiveness.”

This is also why Sylvester expressed his desire to sell his business, insisting on keeping the store’s numerous employees — a component of Matthews’ acquisition strategy.

“There are numerous aspects that, due to our scale, we believe we can truly enhance a store like his,” Matthews shared. “I genuinely find it thrilling as we seek to provide them with additional resources and ensure everyone can continue their work moving forward.”

Wall Street has noticed how profitable and well-protected franchised dealerships are in the U.S. The franchised dealer framework, which exists to sell new vehicles to consumers instead of automakers marketing their vehicles directly, is distinctive and heavily regulated.

“I perceive endless potential. The opportunity for expansion within our company is limitless,” Sonic Automotive President Jeff Dyke conveyed to CNBC during a recent interview. “I believe that having mom-and-pop dealers is advantageous for the industry. However, those mom-and-pop dealers must adapt their mindset.”

Sonic Automotive, a publicly traded company valued at over $2 billion, has expanded from 96 franchised dealership locations in 2015 to 134 by the end of the previous year. The company has also undergone massive growth in its EchoPark used vehicle stores and Sonic Powersports, with revenue surging 58% to $15.2 billion last year.

Others, including Lithia Motors, have adopted even more aggressive growth strategies. The Medford, Oregon-based firm outpaced longstanding dealership group AutoNation to claim the title of top U.S. new vehicle franchised dealer in 2022.

Lithia, with a market cap of $6.3 billion, has implemented a bold growth strategy, seeing its revenue jump from $8.7 billion in 2016 to $37.6 billion last year. The company has nearly tripled its new and used store count from 154 locations to 455 during that period.

John Murphy, a veteran automotive analyst and managing director of strategic advisory at buy-sell advisory firm Haig Partners, asserts that dealerships remain an exceptionally profitable niche for investors, despite a slight cooling phase after businesses enjoyed inflated profits during the Covid pandemic.

“Structurally, there remains significant potential for growth, and there’s increasing interest from existing capital in the dealership sector, particularly from outside participants, private equity family offices, and other financial resources focused on this limited pool of dealers,” he noted. “The upward potential in earnings is growing, and there’s escalating interest, or demand, from the buying side of the market.”

All these factors culminate in a scenario where many mom-and-pop dealerships are primed for acquisition or expansion.

“There are numerous elements complicating competition for a small mom-and-pop dealership,” remarked Talon Fee, a managing director at Dave Cantin Group who facilitated the sale of Sylvester Chevrolet to Matthews Auto Group. “This does not imply that small mom-and-pop dealerships cannot persist and flourish, but they must possess a strategy.”

Fee and others have identified the primary reasons for owners choose to sell, which include a lack of succession planning, increasing competitiveness in the changing industry, and a waning commitment to reinvest in their businesses.

“A significant amount of external capital has found ways to infiltrate the market, particularly since one must be an active operator to gain approval from manufacturers,” explained Gordon from Dave Cantin Group.

Nevertheless, the industry is evolving in various ways, as new automakers like Tesla, Rivian and Lucid strive to circumvent the franchised dealer system and directly market vehicles to customers.

These companies have persistently challenged state regulations to enable such sales, with Rivian recently securing a victory against car dealerships in Washington state by threatening to take its case to voters with a ballot initiative to permit direct sales.

This contributes to the shifting U.S. automotive retail environment that owners like Sylvester and his wife, who also worked at the dealership, have not had to confront in the past. It’s also an aspect that Sylvester and many other small mom-and-pop stores won’t need to contend with upon selling their businesses.

“I have enjoyed a wonderful life, make no mistake. However, everything has its time,” expressed Sylvester, who intends to devote his retirement to managing a 92-acre farm in Pennsylvania. “We earned a decent living. We contributed positively to the community.”