The average U.S. auto dealership’s profits are down as the industry continues to “normalize” from pandemic-era highs, according to The Presidio Group’s latest quarterly report.

Presidio Perspectives: A Quarterly Outlook on Auto Retail and M&A Trends for the fourth quarter of 2023 followed the publication’s debut in December, which focused on the decline from the record profitability of the COVID era — a phenomenon it called the Great Normalization.

The new report showed net pretax profits sinking further in Q4, down 20.4% for calendar year 2023 following the 19.5% drop recorded through the first nine months.

“This year will be choppier and will likely trend down overall,” Presidio president George Karolis said in a news release. “But brands and geography matter much more than ever during this period of normalization.”

The report is based on aggregated financial results of more than 4,000 U.S. franchised dealerships that work with 20 Group provider NCM Associates. Data about the average U.S. dealership’s performance comes from the Presidio-NCM Average Dealership Performance Benchmark.

“As dealerships’ operational metrics continue to decline from the extraordinary levels of the first few years of the pandemic, they will benefit by looking at how their results stack up to their peers,” NCM CEO Paul Faletti said.

“Dealers also need to examine their pre-pandemic operational baseline so they can best position themselves for the more traditional retail environment we’re starting to see come back into play. That in part means going back to the basics — in a lot of areas, we took our eye off the ball during COVID.”

Despite the declines, Presidio’s analysis of benchmark metrics show auto retailers’ profits are still well above pre-pandemic norms, with the average dealership’s net pretax profit in 2023 registering more than 2½ times more than in 2018.

The report also includes the Presidio Dealer Direction Survey, which found more than two-thirds of 285 respondents, representing about 3,100 franchised dealerships, saying they expect dealership profitability to fall more in the next 12 months.

The report said that trend is “not a falling knife” — but it is impacting dealership valuations, which 47 percent of dealers said they expect to decline in 2024.

Toyota and its luxury sibling Lexus are at the top of dealer’s list of most desirable dealership brands, the survey showed, and both of them produced significant increases in throughput in 2023 as inventory levels continued to recover.

Honda and Subaru made significant gains in desirability from the Q3 report, with Honda moving up from seventh to third and Subaru up two spots to No. 4.

The report showed 534 dealerships were sold in 2023, down from 596 in 2022 and 707 in 2021, with private dealers accounting for 97 percent of those transactions.

The full report is available for download here.