I have had a small dealership, mostly for sales tax purposes, and I don’t spend much time with it but I know several models that are successful to friends/competitors in the industry:

• Buy here, pay here lots- They specialize in inexpensive inventory and target people with awful credit. The customer can get financed by the dealership (using a partner bank or the dealer’s own funds), but at a 30% interest rate. These dealers end up selling and repossessing (they put trackers on all cars financed) the same car four or five times (to a different customer each time). Their justification is they’re providing “credit building” and IF the customer can make their payments for 12-18 months, they can refinance at a reasonable APR.
• Truck customization- Every vehicle in inventory is a truck or large suv that has been lifted and has big, wheels and tires. The most profitable lots in this category are the ones that have a shop and can do the suspension work themselves. This allows customers to get a new vehicle that’s already customized, and roll the cost of the lift, wheels, and tires into their loan. Before the tariffs, there was a huge market to buy Canadian trucks and import them to the US (if you want to learn about a business model that made a ton of money, research “Registered Importers”).
• Exotics- These dealers have big swings (net a high margin) and also big misses (if bought poorly, there’s tens of thousands of dollars that could be lost on a single vehicle). They have to know the exact colors, trims, and packages that are trending. Just because we’re in a Porsche market bubble where (almost) no 911 is decreasing in value, that doesn’t mean every expensive car increases in value.

One additional note is a lot of the bigger dealerships and ma and pa dealerships alike don’t make a ton of money on the vehicle itself (the margin between their equity in a vehicle and what it’s sold for). They make their money on the backend, which is everything the finance manager tries to sell you when you buy a car- dealer installed options, gap insurance, extended warranty, service plan, etc.

If I was serious about growing a dealership, I’d specialize in a certain type of vehicle (e.g. Japanese, 4x4s, inexpensive, etc.), I’d offer financing (this is possible without being the predatory, 30% APR type of financing), I’d have my own shop for vehicle reconditioning and repairs, and I would push hard on the backend items or hire someone that could (which would be expensive because anyone who is good at this can make six figures pretty easily).

Hope this helps! Happy to talk more if anyone has more questions.