Sonic Automotive used the 50th Annual Automotive Symposium to present a relatively resilient business outlook despite high vehicle prices, negative equity among some buyers and an uneven electric-vehicle market. The company said its three operating segments—franchise dealerships, EchoPark pre-owned stores and powersports dealerships—generated approximately $15 billion in annual revenue and offer different ways to expand.
Management said Sonic was the only public franchise dealership peer to deliver sequential growth in new-vehicle gross profit per unit, used-vehicle gross profit per unit and finance and insurance profit per unit between the second and third quarters of 2025. EchoPark also reported 22% year-over-year volume growth in the third quarter, following 18% growth in the second quarter. Its franchise used-vehicle operations recorded three consecutive quarters of same-store volume growth.
The franchise business represents about 80% of revenue and operates 108 locations. More than 60% of its revenue comes from luxury brands including BMW, Mercedes and Jaguar Land Rover, while parts and service account for roughly three-quarters of franchise gross profit. Sonic said the average selling price of new vehicles in its mix exceeds $60,000, compared with an industry average of approximately $50,000.
EchoPark contributes about 15% of revenue through 18 locations. After being rescaled in 2023, the business is beginning to expand again, with a new Orlando, Florida, store planned for December 2025 and two to four additional openings expected in 2026. Management said the main limitation on faster expansion is finding suitable land in the right markets.
The used-car retailer generally prices vehicles about $2,500 below market, or at approximately 90% to 95% of market prices. EchoPark processes around 370 to 380 vehicles per rooftop each month, compared with 80 to 85 at franchise stores. Its current front-end gross profit per unit is about $200 to $300, while the company is targeting a range of $3,100 to $3,300. Non-auction sourcing accounts for roughly half of inventory and saves about $1,200 per vehicle compared with auction-sourced units.
Sonic said EchoPark could eventually match or exceed the franchise business in revenue over the medium to long term. Management believes greater consumer awareness, new stores and improving used-vehicle affordability can support that expansion. A brand campaign was scheduled to begin in the fourth quarter of 2025.
The wider vehicle market remains constrained by affordability. Sonic said around 20% of new-vehicle monthly payments now exceed $1,000, while more than 70% of buyers use loan terms of at least 72 months. The company views approximately 16 million annual new-vehicle sales as the new normal, compared with a historical peak of roughly 17.5 million, and expects U.S. sales of 15.5 million to 16 million units in 2026.
Management said some consumers are shifting from new vehicles into the used market, while others remain constrained by negative equity from vehicles purchased during the 2021-to-2023 price surge. Used-vehicle supply may improve as lease maturities increase, with about 500,000 additional maturities expected in both 2026 and 2027. Sonic said that supply should benefit EchoPark and its franchise used-car operations over the next 12 to 24 months.
Electric vehicles remain a mixed factor. EVs account for about 10% of Sonic’s new-vehicle sales and created a year-to-date blended gross profit headwind of approximately $125 per unit. The company also said roughly 2,200 EV sales recorded in 2024 did not recur in 2025 after the federal tax credit expired. However, used EV wholesale prices were the only vehicle category to rise in the latest quarter, and management said off-lease used EVs can be priced at 40% to 50% of the cost of a new model.
Sonic is adapting its service and warranty operations to a changing vehicle fleet. Average repair orders for EVs are about 50% more expensive than those for internal-combustion vehicles, while most parts and service gross profit comes from vehicles that are four to eight years old. The company is also testing artificial-intelligence agents for service scheduling, customer targeting, marketing and vehicle shopping support.
Capital allocation remains divided among dividends, share repurchases and acquisitions. Management said leverage was approximately 2.5 times, in line with its target, and indicated that buybacks could become more attractive if suitable acquisitions do not emerge. Sonic said it is seeing some of the strongest acquisition opportunities in a decade, particularly platform deals involving seven to 15 stores and powersports businesses, which management said often trade at two to four times earnings.
Executives also said acquisitions and buybacks draw from the same capital pool, so decisions will depend on the relative opportunity. In the company’s view, the combination of a luxury-focused franchise network, improving used-vehicle supply and EchoPark’s expansion gives Sonic several potential growth paths while maintaining a balanced approach to investment and shareholder returns.
Sources: Investing.com News.