Dealers Are Making Record Profits While You're Drowning In Payments
Group 1 Automotive just posted Q3 earnings, and boy, are they making money hand over fist. Record quarterly revenues of $5.8 billion—up 10.8% year-over-year. Record used vehicle retail revenues of $1.9 billion. Record parts and service revenues, up 11.2%. Record F&I gross profit. Everything's a record. Meanwhile, you're out here trying to figure out how to afford an $758 monthly car payment. Fun times.
Let's break down what's actually happening here. Group 1 operates 259 dealerships across the U.S. and U.K. They're a Fortune 250 company, which means they're massive. And in Q3, their U.S. operations delivered "outstanding results across every major business line," according to CEO Daryl Kenningham. New and used vehicle sales grew year-over-year. F&I income jumped. Parts and service profits hit records. The machine is humming.
But here's the disconnect: while dealers are posting record profits, consumers are getting absolutely crushed by affordability. Average monthly car payments hit $758 in October—an all-time high. Nearly 12% of financed deals now stretch to 84 months or longer. That's seven years of payments. You'll still be making payments when the car needs its third transmission.
Group 1's adjusted diluted EPS came in at $10.45, slightly missing Wall Street's $10.64 expectation. Their stock dropped 4.79% in pre-market trading. But revenue beat forecasts—analysts expected $5.63 billion, and Group 1 delivered $5.78 billion. So they're making more money than expected but slightly less profit per share. Boo hoo.
The earnings call revealed some interesting dynamics. New vehicle GPU (gross profit per unit) is moderating from the insane highs of recent years, but Group 1 maintained "strong operational discipline through effective cost management." Translation: they're making slightly less per car than during the pandemic gouging era but still doing great. Used vehicle GPU dropped 3%, but they made up for it with volume.
F&I—finance and insurance—grew over 5%. That's where dealers make serious money: selling you loans, extended warranties, gap insurance, paint protection, and every other add-on imaginable. When someone finances a $45,000 car at 6.56% interest over 84 months, the dealer makes money on the financing, the warranty upsell, and probably three other products you didn't know you were buying.
Parts and service hitting record revenues and profits tells you everything about where the real money is. Once you buy the car, dealers make steady income from maintenance, repairs, and warranty work. It's recurring revenue that doesn't depend on new car sales. Smart business, actually. Just expensive for you.
Group 1 also announced they're acquiring a Mercedes-Benz dealership in Georgia, "reinforcing our strategy of disciplined growth in key cluster markets." They're expanding into premium brands because that's where the margins are. Luxury car buyers don't blink at $1,000 monthly payments. Volume brands? Much tighter margins.
The UK side is struggling, though. Softer industry volumes, BEV-related margin pressure, and overall challenging conditions. Group 1 is restructuring their UK operations and informed JLR they're exiting Jaguar Land Rover franchises within 24 months. Some of that real estate will be repurposed for other brands. The UK market is expected to stabilize around 2 million units, but it's been rough.
During the earnings call, analysts asked about the luxury segment softening. Group 1 execs said they haven't seen significant weakness. Lexus remains very strong. BMW did well. Audi's difficult. So premium buyers are still buying, which keeps those high-margin sales flowing.
Year-to-date, Group 1's revenues from dealership dispositions and franchise terminations totaled about $470 million. They're constantly optimizing their portfolio—keeping profitable franchises, dumping underperformers. It's rational business strategy. Just don't expect sympathy when you're struggling to afford the cars they're selling.
They also bought back 185,788 shares in Q3 at an average price of $443.81, spending $82.5 million. Year-to-date, they've repurchased 587,437 shares for $249.8 million. That's nearly a quarter-billion dollars returned to shareholders while consumers are maxing out 84-month loans to afford basic transportation.
Here's the thing: Group 1 isn't doing anything wrong. They're running a successful business in a challenging environment. They're managing costs, diversifying revenue streams, investing in premium brands, and returning value to shareholders. That's literally their job. The problem isn't dealers making money—it's that the entire market structure has shifted to where only dealers can make money while consumers drown in debt.
Average transaction prices over $46,000. Interest rates around 6.56%. Monthly payments at $758. Nearly 27% of trade-ins underwater. And dealers posting record revenues. Something's broken here, and it's not the dealer business model—it's affordability. When the only way to move metal is 84-month loans, we've got a problem.
So congratulations to Group 1 Automotive on their record quarter. Truly, well done. Just maybe think about the folks on the other side of those F&I contracts who'll still be making payments in 2032. They're not having quite as good a time.
