US Franchise Auto Dealers: Updated Thoughts and 2Q Wrap: Move to Cautious Stance as Challenges Build on Navigating P&S Car Parc Backdrop and Used Sourcing Competition, While BS Leverage Moves to Cycle Highs

Research evidence excerpt

US Franchise Auto Dealers: Updated Thoughts and 2Q Wrap: Move to Cautious Stance as Challenges Build on Navigating P&S Car Parc Backdrop and Used Sourcing Competition, While BS Leverage Moves to Cycle Highs

J P M O R G A N North America Equity Research

04 August 2026

US Franchise Auto Dealers

Updated Thoughts and 2Q Wrap: Move to Cautious

Stance as Challenges Build on Navigating P&S Car

Parc Backdrop and Used Sourcing Competition, While

BS Leverage Moves to Cycle Highs

We move to a more cautious stance on the franchise dealership sector given a

sharper than expected slowdown in P&S profit growth (we had cited modest risk

in our 2Q preview) and underwhelming used car sourcing execution, all while

balance sheets have been levered up to cycle highs. The primary culprit, that we

believe is likely to cap multiples near-term is slowing P&S growth, driven by the

ongoing decline in the 4-7 yr old car parc (Figure 29JPMUSCarParcandAvailableUsedCarSuplyOutlok, as new car SAAR declined from

~17.0 mn in 2019 to ~14.5/14.9/13.9 in 2020/2021/2022), the sweet spot for high Autos & Auto Parts

margin customer pay work for franchise dealers. Sourcing is becoming increasingly Rajat Gupta AC

challenging in used cars, where SS unit growth continues to lag new car performance (1-212) 622-6382

(SAH being the exception), with minimal GPU/F&I offsets baring exceptions, and rajat.gupta@jpmorgan.com

points to increasing consumer cross shopping (potentially a tipping point?), with Jash Patwa

proliferation of ease of selling cars online – for example, KMX + CVNA alone capture (1-212) 622-5472

jash.patwa@jpmchase.com

~20% share of 0-10 yr old retail vehicle sourcing in the industry (Table 20KMXandCVNAMarketShareinSourcingUsedConsumerVehiclesandRetailSales(0-10yrold)). With new

Yash Beswala