Service profits cushion the blow of rising software rollout costs
- ABG sells new and used vehicles, but the profit story is anchored by Parts & Service.
- In Q2 2026, Parts & Service accounted for 49.7% of gross profit, supported by a historically old 13.0-year average vehicle fleet.
- The company is facing near-term cost pressures from its Tekion software rollout, causing SG&A expenses to spike.
- Management sacrificed used vehicle volume for profitability, resulting in a 14% drop in same-store used retail units.
- Finn ranks the company relatively low because service strength battles margin pressure, high leverage, and software transition friction.
Service absorbs the shocks of transition
Asbury Automotive Group is trying to offset fading vehicle margins with more profitable service work and internal efficiency. The easy money in new vehicles is going away as supply returns. In Q2 2026, new vehicle gross profit fell 14% amid normalizing margins. At the same time, Parts & Service rose to nearly 50% of total gross profit, taking on the burden of defending earnings as the average U.S. vehicle reaches a historic 13.0 years old.
The bull case points to early wins in technology and aggressive capital return. Management crossed the 70% completion mark for rolling out a new dealership software system in Q2 2026, which is starting to yield productivity gains in mature markets. The company is also buying back stock aggressively, using current valuations to create an earnings floor, even if it means tolerating net leverage up to 3.4x.
The bear case centers on the steep costs of that software transition and shrinking unit volumes. Running duplicative systems drove a severe 401 basis point spike in SG&A as a percentage of gross profit in the second quarter. Furthermore, management abandoned a plan to drive used vehicle volume, choosing instead to protect margins. This decision resulted in a 14% drop in used units sold, which threatens to starve the lucrative service and finance pipelines down the road.
The next major test is finishing the software rollout and eliminating duplicative costs. Investors will watch closely to see if the company can return SG&A metrics to historical levels and manage the volume trade-offs without damaging long-term customer relationships.
Dealerships with a service tail
Asbury owns franchised auto dealerships across 14 states. A customer can buy a new vehicle, trade in a used one, arrange financing, buy insurance protection products, and return for repair work. The same store can touch the customer many times over the life of the car.
Revenue mostly comes from selling vehicles. Profit is more balanced. In Q2 2026, Parts & Service was the largest piece of gross profit, followed by Finance & Insurance, new vehicles, and used vehicles. That matters because vehicle sales are cyclical and sensitive to interest rates, while service work tends to be steadier.
Total Care Auto is the company's internal provider of finance and insurance products. It sells items like extended service contracts, gap debt cancellation, and prepaid maintenance through Asbury dealerships. Capturing more of the product chain improves economics, but the rollout changes revenue timing and draws legal attention. The FTC case focuses closely on these add-on product sales practices.
The company builds its moat on scale, brand relationships, local franchise laws, and service capacity. As of the end of 2025, Asbury operated 223 new vehicle franchises representing 36 brands. Those advantages become liabilities if manufacturers push for direct sales, buyers pull back, or large software and store integrations disrupt local operations.
What ABG sells
New vehicles
Asbury sells new cars, trucks, and SUVs from luxury, import, and domestic brands. This segment drives traffic, but gross profit per unit is falling.
Used vehicles
The company sells used vehicles at retail and wholesale. Management recently prioritized per-unit margins over volume, leading to a drop in unit sales.
Parts & Service
This includes maintenance, repair, warranty work, collision repair, and parts. It made up roughly half of Q2 2026 gross profit.
Finance & Insurance
Asbury arranges customer financing and sells add-on protection products. The segment is profitable but faces revenue deferrals and regulatory scrutiny.
Total Care Auto
TCA is the in-house finance and insurance product provider. It captures a larger share of the profit pool than third-party options.
Profit mix, not just sales mix
The segment shares shown here use Asbury's Q2 2026 Dealerships gross profit mix. Total Care Auto is a separate reporting segment, but its products also flow through the Finance & Insurance line.
What could go wrong
New vehicle margins keep falling
High impact · High oddsAsbury is giving back the high new vehicle margins it earned when inventory was tight. New vehicle gross profit fell 14% in Q2 2026 as margins normalized downward. If this drop continues, other segments must grow just to hold total profit steady.
Costly software rollout disruption
Medium impact · Medium oddsThe Tekion dealership software transition is proving costly in the near term. Running duplicative systems drove SG&A up 401 basis points as a percentage of gross profit in Q2 2026. A rough final transition could delay the expected operating efficiencies and hurt profitability.
Used car volume sacrifice hurts future funnels
Medium impact · High oddsManagement abandoned a volume-focused strategy in used cars, opting to protect per-unit margins instead. This caused same-store used retail units to drop 14% in Q2 2026. Shrinking the used car buyer base ultimately starves the downstream finance, insurance, and service funnels.
Elevated leverage limits flexibility
Medium impact · Medium oddsThe company chose to buy back stock aggressively in the first half of 2026, pushing net leverage to 3.4x. Management pushed its target of returning to 3.0x back to 2027. Higher debt levels make the business more sensitive to any sudden drop in consumer spending.
FTC case changes F&I economics
High impact · Medium oddsAn ongoing Federal Trade Commission proceeding focuses on add-on product sales practices, including claims tied to hidden fees and unauthorized products. An adverse outcome could mean fines, mandatory operating changes, or lower attachment rates for lucrative finance and insurance products.
In one breath
How does Asbury Automotive make money?
The company sells new and used vehicles, repairs vehicles, sells parts, arranges financing, and sells protection products. Vehicle sales bring in a lot of revenue, but Parts & Service and finance products are key profit drivers.
Why is Parts & Service so important for Asbury?
Service work can repeat for years after a car is sold and often carries better margins than selling the car. In Q2 2026, Parts & Service made up nearly 50% of gross profit, supported by an aging U.S. vehicle fleet.
What is TCA at Asbury Automotive?
Total Care Auto is the company's in-house provider of products like extended service contracts, gap debt cancellation, and prepaid maintenance.
What is the biggest risk for the stock?
The biggest risks are falling new vehicle margins, costly disruptions from its dealership software rollout, and shrinking used car volumes that could hurt future service revenue.
Sources and research notes
This page combines Finn's company research with public filings and other cited materials. The thesis is reviewed when material company information changes; Finn Scores use the latest available scoring data.
- Thesis reviewed
- August 16, 2026
- Score data
- September 6, 2026
- Reviewed by
- Shivam Bharuka
Comparable Auto & Truck Dealerships companies
Companies near Asbury Automotive Group, Inc. in Finn's Auto & Truck Dealerships industry ranking.
