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The Zacks Auto Retail and Wholesale industry is navigating a mixed landscape with demand holding up, but rising affordability and financing pressures could temper sales momentum. Tightening inventory, particularly in affordable segments, is supporting dealer pricing power but may eventually limit consumer choices and delay purchases.
At the same time, new and used vehicle prices remain elevated, while rising borrowing costs could offset improving credit availability. The EV market faces additional uncertainty as the removal of federal incentives, constrained supply and automakers' pullback from new models weigh on sales. Overall, resilient demand supports the industry, but affordability, tight inventory and EV headwinds warrant a cautious outlook.
That said, a few retailers like Penske Automotive Group and Lithia Motors are better positioned to weather the cycle, backed by strategic acquisitions, ongoing digitization efforts and shareholder-friendly capital allocation.
About the Industry
The auto retail and wholesale industry plays a key role in how cars, trucks and auto parts reach consumers. Companies in this space operate through dealership networks and retail chains, selling both new and used vehicles, offering repair and maintenance services, and helping customers with financing. Since this is a consumer-driven industry, its performance often depends on how strong the economy is.
When people have more disposable income, they're more likely to spend on vehicles. But during tougher times, like economic slowdowns, big purchases are often put on hold. The industry has also undergone meaningful structural change in recent years, with dealers increasingly investing in digital tools and e-commerce capabilities, a shift that continues to reshape how vehicles are bought and sold.
Key Investing Themes
Resilient Demand Is Tightening Vehicle Inventory: New-vehicle demand remained resilient in August, with the sales pace rising 3.3% from July and edging higher year over year, per Cox Automotive. This strength is steadily absorbing dealer inventory. Inventory fell 1.6% month over month to 2.68 million units, marking the third consecutive monthly decline. As a result, industry days' supply reached its lowest level since spring 2025.
The pressure is particularly evident in more affordable vehicle segments, where supply is becoming increasingly constrained. For franchised dealers, tighter inventory also means less need to discount aggressively. If supply continues to shrink while prices remain elevated, consumers may delay purchases rather than stretch their budgets.
High Vehicle Prices Creating Affordability Pressures: Vehicle affordability remains a key challenge even as consumers continue to buy. Per Kelley Blue Book, the average transaction price for a new vehicle climbed above $50,000 in August for the first time in 2026. That can be attributed to stronger sales of midsize SUVs and price increases in popular segments such as subcompact SUVs and compact cars.
At the same time, households facing financial pressure are increasingly gravitating toward lower-priced vehicles. Even used cars are becoming more expensive, with the average listing price reaching $27,239 in August, up 7% year over year and the highest since December 2022. Rising prices could increasingly limit demand among budget-conscious buyers.
Better Credit Access Faces Rising Borrowing Costs: Per Cox Automotive, auto credit availability improved for the fourth straight month in August, its strongest level since November 2015. However, easier access to financing does not necessarily mean more affordable financing. Longer-term borrowing costs are rising as Treasury yields climb amid concerns around inflation, oil prices, government debt and the fiscal outlook.
The 10-year Treasury yield recently moved above 4.9% per CNBC, its highest level since November 2023, putting upward pressure on consumer auto-loan rates. This creates a mixed environment for retailers. More consumers may qualify for financing, but higher monthly payments could discourage purchases.
EV Market Reshaped by Policy and Supply Constraints: EV sales are facing a difficult reset after the expiration of the federal EV tax credit. Per Electrek, around 140,000 EVs were sold in North America in August, down 33% from a year earlier, although the comparison is distorted by unusually strong purchases in August and September 2025 before the credit expired.
The weakness is not purely demand-driven. Limited vehicle availability is also weighing on sales, particularly as automakers scale back EV plans amid an unfavorable policy environment. Canceled models and constrained imports are reducing consumer choice, leaving the EV retail market caught between softer incentives, uncertain demand and inadequate supply.
Zacks Industry Rank Indicates Dim Prospects
The Zacks Auto Retail & Wholesale industry is part of the broader Zacks Auto-Tires-Trucks sector. The industry currently carries a Zacks Industry Rank #202, which places it in the bottom 18% of nearly 245 Zacks industries.
The group's Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates weak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry's position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are losing confidence about this group's earnings growth potential. Over the past year, the industry's earnings estimate for 2026 has declined 6.4%.
Despite the weak backdrop, we will present a couple of stocks that you might consider adding to your watchlist. But before that, let's discuss the industry's recent stock market performance and valuation picture.
Industry Lags S&P 500, Tops Sector
Over the past year, the Zacks Auto Retail & Whole Sales industry has inched up 0.5%, underperforming the Zacks S&P 500's gain of more than 16%. Meanwhile, the Auto, Tires and Truck sector fell 3.6% during the same timeframe.
Industry's Current Valuation
Since automotive companies are debt-laden, it makes sense to value them based on the enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio.
On the basis of the trailing 12-month EV/EBITDA, the industry is currently trading at 12.12X compared with the S&P 500's 17.75X and the sector's trailing 12-month EV/EBITDA of 25.76X.
Over the past five years, the industry has traded as high as 13.47X, as low as 5.67X and at a median of 8.65X.
2 Stocks Worth Considering
Penske Automotive: The company engages in the operation of automotive and commercial truck dealerships. Penske Automotive benefits from resilient service and parts operations, with higher same-store revenues, gross profit and margins. Its expanding dealership portfolio, strong liquidity and consistent capital returns provide additional support, while rising Penske Transportation Solutions equity income adds diversification. Premier Truck Group also offers upside from a strong industry backlog and expected second-half deliveries.
As of June 30, 2026, PAG had about $1.4 billion of liquidity. During the first six months, it repurchased 265,104 shares for $42.5 million and had $221.2 million remaining under the authorization. Penske Automotive raised its quarterly dividend by 1.4% to $1.44 per share in July, marking the 23rd straight quarterly hike.
PAG currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for 2026 and 2027 sales implies year-over-year growth of 6% and 3%, respectively. The consensus mark for the company's current and next year EPS has moved north by 5 cents and 1 cent, respectively, over the past 30 days.
Lithia Motors: The company is one of the leading automotive retailers of new and used vehicles, and related services in the United States. Lithia Motors' diversified model supports earnings through vehicle sales, aftersales, financing and digital channels. Aftersales remains the largest gross profit contributor, while Driveway Finance Corporation is building a recurring income stream as penetration and receivables expand. The company's portfolio optimization efforts bode well. In the first half of 2026, it acquired $765 million of annualized revenues and divested $120 million of underperforming revenues.
The company bought back $242 million of stock in the second quarter of 2026 at an average price of $284 and reduced its share count by 17% year over year. Its five-year annualized dividend growth rate is 11%. Lithia recently raised its quarterly dividend by 23% to 70 cents.
Lithia Motors currently carries a Zacks Rank #3. The Zacks Consensus Estimate for 2026 and 2027 earnings implies year-over-year growth of 8% and 15%, respectively. The consensus mark for the company's current and next year EPS has moved north by $1.81 and $1.33, respectively, over the past 60 days.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights Penske Automotive and Lithia Motors
For Immediate Release
Chicago, IL – September 15, 2026 – Today, Zacks Equity Research discusses Penske Automotive Group (PAG - Free Report) and Lithia Motors (LAD - Free Report) .
Industry: Auto Retail & Wholesale
Link: https://www.zacks.com/commentary/2988897/2-auto-retailers-to-watch-amid-tight-inventory-and-costly-loans
The Zacks Auto Retail and Wholesale industry is navigating a mixed landscape with demand holding up, but rising affordability and financing pressures could temper sales momentum. Tightening inventory, particularly in affordable segments, is supporting dealer pricing power but may eventually limit consumer choices and delay purchases.
At the same time, new and used vehicle prices remain elevated, while rising borrowing costs could offset improving credit availability. The EV market faces additional uncertainty as the removal of federal incentives, constrained supply and automakers' pullback from new models weigh on sales. Overall, resilient demand supports the industry, but affordability, tight inventory and EV headwinds warrant a cautious outlook.
That said, a few retailers like Penske Automotive Group and Lithia Motors are better positioned to weather the cycle, backed by strategic acquisitions, ongoing digitization efforts and shareholder-friendly capital allocation.
About the Industry
The auto retail and wholesale industry plays a key role in how cars, trucks and auto parts reach consumers. Companies in this space operate through dealership networks and retail chains, selling both new and used vehicles, offering repair and maintenance services, and helping customers with financing. Since this is a consumer-driven industry, its performance often depends on how strong the economy is.
When people have more disposable income, they're more likely to spend on vehicles. But during tougher times, like economic slowdowns, big purchases are often put on hold. The industry has also undergone meaningful structural change in recent years, with dealers increasingly investing in digital tools and e-commerce capabilities, a shift that continues to reshape how vehicles are bought and sold.
Key Investing Themes
Resilient Demand Is Tightening Vehicle Inventory: New-vehicle demand remained resilient in August, with the sales pace rising 3.3% from July and edging higher year over year, per Cox Automotive. This strength is steadily absorbing dealer inventory. Inventory fell 1.6% month over month to 2.68 million units, marking the third consecutive monthly decline. As a result, industry days' supply reached its lowest level since spring 2025.
The pressure is particularly evident in more affordable vehicle segments, where supply is becoming increasingly constrained. For franchised dealers, tighter inventory also means less need to discount aggressively. If supply continues to shrink while prices remain elevated, consumers may delay purchases rather than stretch their budgets.
High Vehicle Prices Creating Affordability Pressures: Vehicle affordability remains a key challenge even as consumers continue to buy. Per Kelley Blue Book, the average transaction price for a new vehicle climbed above $50,000 in August for the first time in 2026. That can be attributed to stronger sales of midsize SUVs and price increases in popular segments such as subcompact SUVs and compact cars.
At the same time, households facing financial pressure are increasingly gravitating toward lower-priced vehicles. Even used cars are becoming more expensive, with the average listing price reaching $27,239 in August, up 7% year over year and the highest since December 2022. Rising prices could increasingly limit demand among budget-conscious buyers.
Better Credit Access Faces Rising Borrowing Costs: Per Cox Automotive, auto credit availability improved for the fourth straight month in August, its strongest level since November 2015. However, easier access to financing does not necessarily mean more affordable financing. Longer-term borrowing costs are rising as Treasury yields climb amid concerns around inflation, oil prices, government debt and the fiscal outlook.
The 10-year Treasury yield recently moved above 4.9% per CNBC, its highest level since November 2023, putting upward pressure on consumer auto-loan rates. This creates a mixed environment for retailers. More consumers may qualify for financing, but higher monthly payments could discourage purchases.
EV Market Reshaped by Policy and Supply Constraints: EV sales are facing a difficult reset after the expiration of the federal EV tax credit. Per Electrek, around 140,000 EVs were sold in North America in August, down 33% from a year earlier, although the comparison is distorted by unusually strong purchases in August and September 2025 before the credit expired.
The weakness is not purely demand-driven. Limited vehicle availability is also weighing on sales, particularly as automakers scale back EV plans amid an unfavorable policy environment. Canceled models and constrained imports are reducing consumer choice, leaving the EV retail market caught between softer incentives, uncertain demand and inadequate supply.
Zacks Industry Rank Indicates Dim Prospects
The Zacks Auto Retail & Wholesale industry is part of the broader Zacks Auto-Tires-Trucks sector. The industry currently carries a Zacks Industry Rank #202, which places it in the bottom 18% of nearly 245 Zacks industries.
The group's Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates weak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry's position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are losing confidence about this group's earnings growth potential. Over the past year, the industry's earnings estimate for 2026 has declined 6.4%.
Despite the weak backdrop, we will present a couple of stocks that you might consider adding to your watchlist. But before that, let's discuss the industry's recent stock market performance and valuation picture.
Industry Lags S&P 500, Tops Sector
Over the past year, the Zacks Auto Retail & Whole Sales industry has inched up 0.5%, underperforming the Zacks S&P 500's gain of more than 16%. Meanwhile, the Auto, Tires and Truck sector fell 3.6% during the same timeframe.
Industry's Current Valuation
Since automotive companies are debt-laden, it makes sense to value them based on the enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio.
On the basis of the trailing 12-month EV/EBITDA, the industry is currently trading at 12.12X compared with the S&P 500's 17.75X and the sector's trailing 12-month EV/EBITDA of 25.76X.
Over the past five years, the industry has traded as high as 13.47X, as low as 5.67X and at a median of 8.65X.
2 Stocks Worth Considering
Penske Automotive: The company engages in the operation of automotive and commercial truck dealerships. Penske Automotive benefits from resilient service and parts operations, with higher same-store revenues, gross profit and margins. Its expanding dealership portfolio, strong liquidity and consistent capital returns provide additional support, while rising Penske Transportation Solutions equity income adds diversification. Premier Truck Group also offers upside from a strong industry backlog and expected second-half deliveries.
As of June 30, 2026, PAG had about $1.4 billion of liquidity. During the first six months, it repurchased 265,104 shares for $42.5 million and had $221.2 million remaining under the authorization. Penske Automotive raised its quarterly dividend by 1.4% to $1.44 per share in July, marking the 23rd straight quarterly hike.
PAG currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for 2026 and 2027 sales implies year-over-year growth of 6% and 3%, respectively. The consensus mark for the company's current and next year EPS has moved north by 5 cents and 1 cent, respectively, over the past 30 days.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Lithia Motors: The company is one of the leading automotive retailers of new and used vehicles, and related services in the United States. Lithia Motors' diversified model supports earnings through vehicle sales, aftersales, financing and digital channels. Aftersales remains the largest gross profit contributor, while Driveway Finance Corporation is building a recurring income stream as penetration and receivables expand. The company's portfolio optimization efforts bode well. In the first half of 2026, it acquired $765 million of annualized revenues and divested $120 million of underperforming revenues.
The company bought back $242 million of stock in the second quarter of 2026 at an average price of $284 and reduced its share count by 17% year over year. Its five-year annualized dividend growth rate is 11%. Lithia recently raised its quarterly dividend by 23% to 70 cents.
Lithia Motors currently carries a Zacks Rank #3. The Zacks Consensus Estimate for 2026 and 2027 earnings implies year-over-year growth of 8% and 15%, respectively. The consensus mark for the company's current and next year EPS has moved north by $1.81 and $1.33, respectively, over the past 60 days.
Free: Instant Access to Zacks' Market-Crushing Strategies
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can tap into those powerful strategies – and the high-potential stocks they uncover – free. No strings attached.
Get all the details here >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.