Car dealerships made record profits in 2022 by marking up vehicles forty percent and telling you the chip shortage required it. They called it market dynamics. You called your credit union for a loan at nine percent.
Those days ended.
Gross profits fell because inventory returned and customers remembered they hate dealerships. Now the same people who charged you four grand over MSRP for a Kia Sportage want you back for a $89 synthetic oil change. They need service departments to survive downturns. This is the business model. Screw you on the purchase, then see you every six months for brake pads.
The technical pattern here is called a reversion to grift. Dealerships spent decades building service bays for this exact scenario. They knew the sales floor would eventually stop printing money. They prepared by hiring seventeen-year-olds to upsell cabin air filters at 340% markup. The kid tells you it's dirty. You've driven the car three months. He shows you a filter from a 1987 Buick he keeps in his back pocket.
Parts and service revenue doesn't spike like new car sales, but it doesn't disappear when rates hit seven percent. It just grinds. Every soccer mom who financed a Pilot at $680 a month will return for an alignment. The dealership will find something else wrong. They always do.
Retail traders see this headline and think it's bullish for AutoZone. They'll buy calls on Wednesday and wonder why implied volatility crushed them by Friday. The relationship between dealership service departments and auto parts retailers is not what you think it is. Neither is your understanding of theta decay.
Dealerships are hedging against downturns by relying on the one thing that never changes: your car breaks, and you're too lazy to learn YouTube.
Photo by Erik Mclean on Unsplash
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