Why Rightsizing, Not Growth, Will Define the Next Era of Dealer Success
By Tiger Okeley, Executive Board Member at Oak Motors
The last five years have been a wild ride for car dealers. I’ve seen it firsthand in my work with Buy Here, Pay Here (BHPH) dealerships, where industry stress points often surface first. As I talk with my colleagues across the industry, they’re all grappling with the same reality: rising costs, more price-conscious buyers, and tighter margins aren’t going away anytime soon.
What’s changed isn’t just demand. It’s the balance between vehicle quality, inventory quantity, and the cost of doing business. And that balance is reshaping how dealers perform.
In the past, the answer to every problem has been to sell more cars and turn more hours in the repair bays. But I don’t think that’s going to do the trick this time around. Success in 2026 and beyond requires different thinking. Dealers will need to choose a strategic focus over a growth-at-all-costs mindset to succeed in today's auto market.
Why BHPH Sees It First
I’ve faced these challenges in my own business. BHPH dealers operate without a safety net. When you’re a franchised dealer, you enjoy manufacturer support for important consumer-facing aspects of running a car dealership, like marketing dollars, warranty backing, and training resources. When you’re a BHPH dealer, it’s just you. That means when market conditions change, we feel it immediately and have to adapt fast.
We also serve customers who are most vulnerable to economic pressures. When costs rise and credit tightens, our buyers are among the first to get squeezed out of the market. That makes BHPH dealers early indicators of broader industry stress. The problems we’ve faced for years will come for franchised dealers, if they haven’t already arrived.
What I’ve learned isn’t theoretical. It’s tested on car lots and at negotiating tables, with customers who have limited options for securing transportation. I believe these lessons apply to dealers across the spectrum.
The Perfect Storm
The challenges we see today don’t come from a single source. They’re the result of multiple converging factors that have created a perfect storm.
Government regulations, such as CAFE standards, have been driving up costs for years. Smaller, more complex engines are expensive to manufacture and repair. Mandated fuel economy and safety features add costs that consumers can’t opt out of. Meanwhile, monetary policy, inflation, and tariffs drive up prices for manufacturers, dealers, and buyers alike.
These trends were already pushing the industry toward a breaking point. Then the pandemic hit, accelerating everything. Supply chains froze, throwing production into chaos, while government stimulus efforts flooded the market with cash, driving prices even higher. What might have taken a decade to unfold happened in just a few years.
Now everyone’s dealing with the aftermath: new and used cars are more expensive than ever, borrowing costs are higher than they’ve been in years, and buyers are getting squeezed from all sides. Something has to give.
The Race to the Bottom
Many dealers have felt pressured to react to these challenges with the same inventory strategy: sell everything on wheels for as much as possible.
Before 2020, it was common practice for dealers to sell new cars at or below invoice. Today, most dealers are unwilling to give up that margin. Consequently, new vehicles are commonly priced at MSRP or include added dealer markups.
This profit-first approach has also trickled down into used car sales. Dealers used to be far more selective about the inventory they maintained. As buyers searched for more affordable vehicles and new cars became harder to sell, many dealers began making compromises. Where dealers once limited used inventory to low-mileage vehicles from specific manufacturers, they’ll now sell almost anything that still has some life left in it.
These strategies will preserve profitability in the short term, which explains why so many dealers have moved in this direction. But dealers can only focus on the bottom line for so long before they start compromising their brand. A customer who feels burned, whether they paid $80,000 or $8,000, won’t come back. Bad reviews will pile up. Buyers will stay away. You can’t sell your way out of that problem.
The Strategic Shift: Rightsizing Over Growth
The “sell anything to anyone” mindset won’t be sustainable for much longer. Rising costs and declining vehicle quality are shrinking the pool of viable buyers. Dealers that survive will be the ones who get strategic about who their core customers are and how they can best serve them.
An essential part of that evolution will be for dealers to appropriately size themselves. Many dealers have chased growth to cover increasing overhead. However, growth is going to be much harder to come by when dealers are competing for fewer buyers with a brand that has been battered by years of shortsighted decision-making.
Dealers who succeed over the next five years will need to decide how much volume they actually want to handle, then size their operations accordingly. In this environment, growth may not be accessible — or even possible. That’s a hard reality for many to accept. Growth is always an easy goal to rally around because it feels positive. Rightsizing, on the other hand, often involves reducing budgets, narrowing focus, and sometimes employing fewer staff members. That doesn’t feel like winning, but it’s often the smarter move.
I’ve worked through these challenges at my dealerships. We’ve become more selective about our inventory and more focused on serving our core customers well rather than chasing every potential sale. It meant intentionally saying no to revenue opportunities that didn’t support long-term performance.
Rightsizing doesn’t mean retreating. It means aligning inventory, staffing, facilities, and capital with the customers you can serve consistently while maintaining profitability.
Your 2026 Roadmap
I don’t see conditions improving materially in 2026. Inventory constraints will continue. Quality vehicles will remain expensive and harder to source. The pool of buyers will keep shrinking as affordability worsens. For better or worse, this environment is the new normal for vehicle sales.
But there’s a hidden opportunity here. Dealers who take the time in 2026 to define their core market, rightsize their operations, and prioritize business continuity and sustainability over volume or short-sighted profitability will have a roadmap not just for next year, but for the next five.
The dealers who continually chase growth and compromise their brands by selling anything with wheels to anyone willing to buy will wake up one day, wondering why they have performance problems, capital sourcing issues, cash flow concerns, and the loss of a core base of quality customers. In a market defined by higher costs, tighter inventory, and more cautious buyers, the dealers who lead won't necessarily be the biggest, they will be the most intentional.
