Surviving the Squeeze: How Dealers Can Win Even as Margins Get Tight

The last few years felt like cruising downhill at 80 mph — record profits, red-hot demand, lean inventory, and buyers paying top dollar. But now? The road’s leveling out, the supply flood is starting, and interest rates + shifting buyer tastes are giving us a bit of a wake-up call.

So if you’re brushing off your “sell-everything-and-make-bank” playbook — good news: you’re not alone. Dealers across the U.S. are facing a harsh reality: margins are being squeezed, demand is changing and old formulas just aren’t cutting it anymore.

But — and this is the thing — this doesn’t mean it’s time to panic. It means it’s time to adapt, optimize, and pivot smarter.

What’s Causing the Squeeze — and What You Can Control

• Inventory normalization & floor-plan pressure

With new-vehicle supply stabilizing or increasing, inventory carrying costs (floor-plan interest, insurance, depreciation) are eating into what used to be easy margins. Holding costs per unit/day are no longer “just a line item” — they’re a profit drain.

• Buyer affordability & shifting demand

New-vehicle prices remain high, and rising financing costs make buyers think twice. That means more traffic toward used cars, lower-cost segments, or longer decision cycles.

• Margin compression across the board

What we used to depend on — front-end grosses per sale — are shrinking. Pretax profits are down. The era of “we sell volume, we make money” is fading fast.

• A need for diversified revenue streams

With new-car margins thinning, dealers are turning more to used cars, service & parts, F&I, and aftermarket — but that only works if these operations are efficient, intentional, and profitable.

The Dealer Survival Kit — What Actually Works

If you treat margin pressure like a temporary storm, you lose. But if you treat it like a shift — a new landscape — you win. Here’s how you lean into the change:

1. Lean into data, analytics & inventory discipline

• Use holding-cost reports to identify slow-moving units. Push those out quickly.

• Tighten up flooring plans and avoid over-stocking new inventory.

• Consider trading slower moving new inventory for high-turn used that buyers can actually afford.

  
  

2. Double down on fixed ops, service, and F&I

As new-vehicle grosses shrink, your real profit lifeboats become service, parts, F&I, and aftermarket offerings — but only if they're well-run. Leverage loyalty, retention and cross-sell strategies to maximize per-customer lifetime value.

3. Embrace technology, digital retail & smarter marketing

Modern buyers start online (and to no surprise mainly on mobile)— and dealers who lean on clunky processes lose. Now’s the time to adopt AI-powered CRM, digital retail tools, smarter ad spend, and refined lead scoring. That’s where AMG can help act as your co-pilot: optimizing marketing, aligning vendor partners, and using data-driven campaigns to reduce waste and drive real ROI.

4. Re-think marketing spend — make every dollar work

With tighter margins, scattergun marketing won’t cut it. Streamline vendor relationships, audit media spend, and make marketing accountable with transparent reporting. That’s exactly what AMG’s MOTIVATE, COLLABORATE, and EXECUTE packages are for. Focus on targeted campaigns, cost-effective media, and trackable results — not vanity metrics.

5. Build a culture & process that’s lean, nimble, and human

People — your staff, vendors, customers — are not just data points. When margins are tight, culture and operational excellence matter more than ever. As AMG’s founder says: marketing shouldn’t be a shotgun spray but a disciplined extension of your team.

Why Dealers Who Pivot Now Could Come Out Stronger

Think of 2025–26 not as a slump… but a filter. Dealers who adapt will:

• Keep cash flow healthy despite slimmer grosses

• Turn service, F&I, and used-vehicle/resale into consistent profit engines

• Reach buyers earlier and more efficiently with digital-first marketing

• Build loyal customers who return for service, trade-in, and refi — rather than relying on new-car volume

  
  

Because at the end of the day, it’s not about how many cars you sold; it’s about how well you sold them — and what else you did around those sales.

Conclusion — Time to Pivot, Not Panic

So yes — margins are squeezed. Demand is shifting. The old boom-time playbook? It’s collecting dust.

But here’s the bright side: this is your chance to sharpen execution, lean on data, and differentiate through service, marketing, and efficiency. It’s the automotive version of upgrading from a muscle car to a fine-tuned race machine — sleek, agile, built for whatever the road throws at you.

And if you want a partner in the pit crew — someone who knows this industry, speaks your language, and already helps other dealers thrive in tough times — you might just want to check out what AMG can do.

So — are you ready to shift into gear, tighten up operations, and take control of your margins again? Reach out to our gurus today at gurus@amg.team - Let’s roll!