Franchised, new-car dealerships continue to enjoy a rise in lucrative customer-pay service work, plus a sustained uptick in warranty work, judging by initial reports of second-quarter results from publicly traded megadealers.
To keep up with demand and keep customer wait times down, adding service capacity is key – ideally, without adding more service bays. This can be done with more technicians, more service hours and better-managed customer service appointments, executives say in earnings calls.
“We believe this continued strength in customer-pay revenues is attributable to the increase in technician headcount we achieved in 2024, and our efforts to not only retain these technicians, but to continue to grow our technician capacity in 2025,” says David Smith, chairman and CEO of Sonic Automotive of Charlotte, NC.
By the Numbers
Sonic Automotive reports second-quarter revenues of $478.3 million for its parts, service and collision repair business, an increase of 10.4% vs. the second quarter of 2024. For the first half of 2025, Sonic reports fixed operations revenue of $939.5 million, up 7.8% vs. a year ago. (Editor’s note: All fixed ops revenue numbers in this story are on a same-store basis.)
Without disclosing the specific numbers, Sonic says customer-pay gross profit is up 9% vs. a year ago, while warranty gross profit is up a substantial 34%. Those numbers are on a same-store basis for Sonic’s franchised dealerships segment, which reports separately from its EchoPark used-only channel.
For Sonic and for most of its competitors, year-ago comparisons are helped by the June 2024 hacking incident that temporarily shut down dealership service provider CDK Global and seriously hampered thousands of its dealership customers.
In Demand
Sonic says it added a net 335 service technicians in 2024, who are projected to generate total additional fixed operations gross profit at an annualized rate of about $100 million a year. Sonic reports customer-pay work accounts for 54% of its fixed ops revenue in the second quarter, and 63% of its fixed ops gross profit.
Separately, Houston-based Group 1 Automotive says its service technician headcount is up 6% vs. June 2024, and up 20% vs. 2019. Daryl Kenningham, Group 1 president and CEO, says each additional tech represents an average of about $15,000 per month in gross profit, with some brands higher and some lower.
“That’s how we look at our cost. Look at the cost of not having a technician, rather than the cost of what it costs to acquire a technician,” Kenningham says in an earnings call. To add capacity without adding service bays, Group 1 says it has increased Saturday hours, and it’s repurposing some of its collision-repair capacity to better-paying work.
Warranty Work
In the second quarter, Group 1 reports U.S. parts and service revenue of $553.1 million, an increase of 12.8% vs. a year ago. For the first half, U.S. parts and service revenue is $1.1 billion, up 9.2%.
Customer-pay revenue is up 14% in the second quarter vs. a year ago, Group 1 reports, while its warranty work is up a hefty 32% vs. a year ago. Kenningham says Group 1 doesn’t expect such a big increase in warranty work on an ongoing basis. He says current, big-volume recalls from Toyota, General Motors and Ford contribute to the outsized increase in warranty work.
“Generally, we plan for mid-single digits, maybe high, mid-single digits on that. I wouldn’t lean on the current after-sales growth like it is,” Kenningham says. “You look at the warranty numbers, they won't be 31% in the quarters ahead. It might be great if they are, but we wouldn’t plan on it,” he says in the call.
And More Warranty Work
Meanwhile, AutoNation Inc. of Fort Lauderdale, FL, reports parts and service revenue of $1.2 billion for the second quarter, up 11.5% vs. a year ago. For the first half, its parts and service revenue is $2.4 billion, up 6.7%. Its customer-pay work is up 10% for the quarter, while warranty work is up 25%.
AutoNation reports its technician headcount at the end of the second quarter is up 3% vs. a year ago. “We continue to focus on our technician workforce by recruiting, retaining and of course, developing our technicians. And I do think the efforts are paying off,” says Michael Manley, AutoNation CEO.
Manley says AutoNation expects its fixed ops business to grow “roughly mid-single digits” on average.
