Local car dealerships wax and die amid rise of auto mega retailers

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

The store and the family have been a mainstay of the town, just outside of Scranton, ever since. That was until late last month, when Sylvester and his family closed a deal to sell Sylvester Chevrolet to a New York-based dealership group.

“As a family, we decided this might be the time,” said Sylvester, who at 67 has been thinking about retiring. “Unless you're a bigger store, a much bigger store, it's a little bit harder to make money… It's just scale.”

Many members of Sylvester's family plan to continue working at the dealership, but he said they did not feel able to continue running the business amid the rapidly changing auto retail landscape in the U.S. The industry is facing tumultuous adoption of all-electric vehicles, technological changes such as artificial intelligence and growing demands from automakers.

Sales from dealers like Sylvester Chevrolet are happening across the country at a rapid pace as the auto sales business, once considered the competition of mom-and-pop shops, has evolved into a lucrative, trillion-dollar industry rife with consolidation that has drawn more attention from Wall Street and investors in recent years.

While the National Automobile Dealers Association (NADA) reports that the vast majority of its franchised dealers in the United States are small business owners, like Sylvester, that have fewer than six stores, the country's major retailers have grown significantly.

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

Meanwhile, major publicly traded operators such as Lithia Motors and AutoNation have skyrocketed to market capitalizations of more than $6 billion each. Even the online used car retailer carvana – and its $74 billion market capitalization, which exceeds the value of most of the auto companies it sells vehicles to – has quietly begun purchasing new vehicle franchises without disclosing its future plans.

“There's a lot of money that wants to come into the industry,” Brian Gordon, president of dealer advisor and brokerage Dave Cantin Group, told CNBC. “And in general, the industry is more or less aligned on how to value these things. That creates a good climate for [mergers and acquisitions]”.

Multimillion-dollar dealerships have been on the rise amid a decades-long consolidation that has led to a grow-or-die mentality for many American auto retailers.

NADA, a trade association representing franchised dealers, reports that the average dealership owner owns between two and three stores, but the area of ​​greatest growth over the past decade has been in midsize dealerships that own between six and 25 stores.

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

“It's clear that it's a consolidating industry, and it's an industry that will continue to consolidate,” Gordon said. But, he added, that's happening at all levels, especially in the expansion of mom-and-pop stores to larger players.

Dave Cantin Group, an adviser to Matthews Auto Group, the dealer group that acquired Sylvester Chevrolet, makes dozens of such deals a year and said he expects the pace of consolidation, mergers and acquisitions to continue to increase this year.

Matthews Auto Group is one of many regional dealership companies that has decided to expand. The family business began in Vestal (in central New York, south of Syracuse) in 1973 with a single Chrysler-Plymouth store that has grown into an approximately $800 million business with 18 locations and 800 employees.

Rob Matthews, second-generation owner and CEO of Matthews Auto Group, said the company's decision to grow is ongoing and its goal is to become more profitable and better compete in its current markets of New York and Pennsylvania.

“I think it's certainly a competitive advantage. I think standing still is probably not the best play. You're seeing continued scaling,” Matthews said. “The trend is that we will continue to see consolidation that will allow us to remain competitive.”

It's also why Sylvester said he wanted to sell his business, with stipulations about retaining the store's dozens of employees, something that is part of Matthews' strategy when acquiring a store.

“There are a lot of things that, because of our scale, we see that we can really unlock a store like yours,” 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 in the future.”

Wall Street has realized how lucrative and protected franchised dealerships are in the United States. The franchised dealer system, which exists to sell new vehicles to consumers rather than automakers selling their vehicles themselves, is unique and heavily regulated.

“I think there are endless advantages. The opportunity for growth in our company is just endless.” Sonic Automotive President Jeff Dyke told CNBC during a recent interview. “I think having family distributors is really good for business. The thing is, the family distributor is going to have to move forward in their thinking.”

Sonic Automotive, a publicly traded company with a market capitalization of more than $2 billion, has grown from 96 franchised dealerships in 2015 to 134 at the end of last year. It has also seen a massive expansion of its EchoPark and Sonic Powersports used vehicle stores. The company's revenue during that time rose 58% to $15.2 billion last year.

Others, like Lithia Motors, have been even more aggressive in their growth. The Medford, Oregon-based company overtook dealer group AutoNation to become the top U.S. new vehicle franchise dealer in 2022.

Lithia, with a market capitalization of $6.3 billion, has executed a bold growth plan, from $8.7 billion in revenue in 2016 to $37.6 billion last year. The company nearly tripled its new and used stores from 154 to 455 stores during that period.

John Murphy, a longtime automotive analyst and managing director of strategic advisory at buy-sell advisory firm Haig Partners, said he believes dealerships remain an extremely lucrative market for investors, even though things calmed down a bit after companies made inflated profits during the Covid pandemic.

“Structurally, there is real potential for improvement, and there is an increasing level of focus on existing capital in the dealership community as it stands now from outside players, private equity family offices and other equity groups on this limited number of dealerships and a finite number of dealerships,” he said. “Earnings growth is increasing and there is more and more attention, or demand, on the buying side of the equation.”

All of that combines to make many mom-and-pop dealerships ripe for acquisition or expansion.

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

Fee and others said the main reasons for owners to sell are a lack of succession planning, an increasingly competitive and changing industry, and a lack of commitment to reinvest in the businesses.

“There's a lot of outside capital that has figured out how to come in, given the fact that you have to be an operator to get approval from a manufacturer,” said Dave Cantin Group's Gordon.

But the industry is changing in other ways, as new automakers like tesla, rivian and Lucid Try to avoid the franchised dealership model and sell vehicles directly to consumers.

These companies have continually fought state laws to allow such sales, and Rivian recently won a battle with car dealers in Washington state by threatening to take its case to voters with a ballot measure to allow direct sales.

It adds to the changing U.S. auto retail landscape that owners like Sylvester and his wife, who also worked at the dealership, haven't had to deal with in the past. It's also something that Sylvester and many other smaller mom-and-pop stores won't have to compete with once they sell 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 his retirement tending a 92-acre farm in Pennsylvania. “We make a good living. You know, we help the community.”