Automotive Aftermarket Investment Banking Group
Stephen C. Lynch, CFA, CPA, William J. O’Flaherty, David L. Corbett, CFA, Kyle B. Tipping, CFA

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Automotive Aftermarket Market Update

Vehicle Affordability Update

In today’s marketplace, numerous factors influence the Automotive Aftermarket, both globally and within the United States. Some of the well-known drivers shaping the sector include the number of vehicles in operation, the overall age of the vehicle fleet, and the ongoing shift among consumers from a do-it-yourself (DIY) to a do-it-for-me (DIFM) mindset.

Another frequently discussed, but harder to quantify, influence on the industry is the concept of price levels across the sector. Consumers ultimately have choices, and when faced with decisions about the upkeep or overall utility of their vehicle, they must navigate a complicated and ever-changing set of factors that often distill down to a simple question: “Should I repair or replace my vehicle?”

As has been widely reported over the last several years, supply chain disruptions, government stimulus programs, and accommodative monetary policies during the COVID-19 pandemic drove significant inflation across broad segments of the economy. The automotive industry and its aftermarket supply chain were certainly not immune to these forces and prices have remained elevated since.

To illustrate this point, we can examine the average transaction price (ATP) of new light-duty vehicles (LDV), as tracked by Cox Automotive. In September 2025, the ATP of new vehicles in the United States reached $50,080, marking the first time it has ever exceeded $50,000. This represents an increase of 32.5% compared with an ATP of $37,783 recorded in September 2019, the last September before the onset of the COVID-19 pandemic.

There is a silver lining, however, as wages also rose substantially during this period. Based on data from the U.S. Bureau of Labor Statistics¹, average earnings have increased 31.9% since 2019. Unfortunately for the American consumer, vehicle prices have grown at a much faster pace, leaving affordability stretched for many consumers.

This trend is reinforced by the Cox Automotive/Moody’s Analytics Vehicle Affordability Index, which measures the number of weeks of median household income (pre-tax) required to purchase the average new vehicle in the United States. In September 2025, the index stood at 37.4, down from its peak of 44.0 in January 2023, but still well above the pre-pandemic average of 33.3. This calculation suggests that new vehicles are approximately 12.0% more expensive in real terms today than they were before the pandemic with consumers spending, on average, approximately four weeks of additional income to purchase a new vehicle.

For consumers seeking alternatives, the used vehicle market offers another option but not necessarily a more affordable one. Prices in the used market have mirrored those of new vehicles, rising approximately 36.0% from pre-pandemic levels, offering little financial refuge.

This widening affordability gap suggests that more consumers are turning to repairing rather than replacing their current vehicle, which is likely one of the reasons why the average age of light duty vehicles in the United States continues to increase.

(1) Employed full time: Median usual weekly nominal earnings (second quartile): Wage and salary workers: 16 years and over

Tariff Policy Implications

Further complicating this landscape are the new tariff policies announced by the Trump administration throughout 2025. Given their magnitude, these tariffs will likely affect the automotive market broadly by spanning new and used vehicles as well as the aftermarket supply chain. This makes both maintaining or replacing a vehicle increasingly expensive for consumers.

Below, we have summarized the tariffs currently anticipated to affect the automotive market as of the date of this publication. However, given the ongoing threats of new tariffs, reversals of prior announcements, changing applicability provisions, and pending legal challenges, the United States’ trade policy remains highly fluid and subject to change.

At a high level, the tariffs affecting the automotive-linked sectors are primarily product-specific and fall under Section 232 of the Trade Expansion Act of 1962. Fortunately, these tariffs do not currently stack on top of other Section 232 tariffs or country-specific reciprocal tariffs, which have been the subject of considerable debate.

Amidst the fluid nature of the current tariff policies, many industry analysts estimate that the average price of new vehicles imported into the United States could rise several thousand dollars as a result of these tariffs. Even vehicles and parts manufactured domestically are expected to be affected due to tariffs on critical raw materials used extensively throughout the supply chain, most notably steel and aluminum.

Certain exemptions and proposed reductions apply to USMCA¹-compliant products imported from Canada and Mexico, which collectively account for roughly 45% and 57% of all imports of vehicles and automotive parts, respectively, into the United States. Other trading partners – particularly Japan, South Korea, the United Kingdom, and members of the European Union – have negotiated reduced Section 232 tariff rates on automotive-related goods. Additionally, as an incentive for automakers to increase domestic production, there are rebates and other potential credits available for vehicles where final assembly and certain production activities occur within the United States. While it may be difficult to adjust vehicle production and assembly lines, the intent for these credits is to eliminate much of the new incremental tariff costs.

Anticipated Sector Impacts

Tariff impacts and cost increases have only just begun to work their way through the Automotive Aftermarket supply chain, and they remain highly subject to change under the Trump administration’s negotiating posture. Given the complexity of the automotive supply chain and the evolving nature of tariff policy, it is difficult – if not impossible – to determine the full impact on the sector in a single takeaway. However, several key implications appear likely:

• Industry Prices: Prices are expected to rise across both new and used vehicles, as well as for repair and maintenance services, as tariff-driven cost increases are passed on to consumers and as they trade down during vehicle replacement decisions.
• Vehicle Fleet Age: Drivers will likely own their current vehicle for longer periods of time as they, broadly speaking, choose to repair rather than replace their vehicles.
• Delayed Maintenance: Some consumers may stretch service intervals or delay certain maintenance, particularly for discretionary repairs, in an effort to manage expenses.
• DIY vs. DIFM Trends: In response to current cost pressures, some consumers may temporarily opt to perform basic maintenance themselves rather than relying on professional service providers.
• Supply Chain Disruptions: Differences in tariff rates based on a product’s country of origin, assembly location, or material composition could create short-term sourcing challenges. Over the longer term, manufacturers may relocate production to domestic or near-shore facilities to reduce tariff exposure.

As these forces continue to unfold and produce uneven effects across the sector, many companies are likely taking a cautious, wait-and-see approach as they evaluate how best to position themselves amid this turbulent environment.

(1) United States-Mexico-Canada Agreement
(2) Subject to Section 232 of the Trade Expansion Act of 1962; which do not appear to stack on top of other Section 232 tariffs or country-specific reciprocal tariffs

 

Trends We’re Watching

Vehicle Miles Traveled, Same-Store Sales Growth; Net Store Unit Growth

American automobile travel accelerated throughout the first half of 2025.  Overall vehicle miles traveled (VMT) increased 1.0% during the 12-month period ended July 31, 2025 compared to the prior 12-month period. Furthermore, each month except for February 2025 recorded higher VMT than the comparable month from the prior year.

Publicly traded multi-site operators generally continued to pursue unit count growth during the first half of 2025. However, Monro and Advance Auto Parts each saw large contractions in unit counts as both companies worked on rationalizing underperforming stores throughout 2025. Separately, Driven Brands sold their entire Take 5 Car Wash business (383 locations) to Whistle Express, which caused a large one-time store  reduction in Q1 2025.

Additionally, publicly traded multi-site operators mostly posted positive results on a same-store sales basis, with Valvoline, Mister Car Wash, O’Reilly Auto Parts, and Auto Zone leading the way. 

(1)  Source: Federal Reserve Bank of St. Louis
(2) Source: Company Filings

 

Wage Rates; Motor Vehicle Parts & Tire Costs

Wage rates across the Automotive Aftermarket have displayed mixed results during 2025.

With an average year-over-year increase of 4.8% through July 2025, hourly wages at general automotive maintenance and repair facilities have experienced the most growth out of the three categories presented below and have out paced the 3.9% increase in nationwide hourly wage rates across all industries and positions during this same period.

Wages at tire dealers increased 1.7% on a year-over-year basis, which fortunately lagged the increase in broad, nationwide hourly wages noted above. An additional silver lining comes from wages at auto parts stores, which have remained flat year-over-year.

As measured by the Producer Price Index (PPI), prices for motor vehicle parts and tires and other related materials remained at elevated levels and are beginning to show the impact of the recent tariffs implemented by the Trump Administration.

As discussed during our opening remarks, the full impact of these tariffs may not have fully materialized yet. This is because the Automotive Aftermarket supply chain is still working through pre-existing inventories that did not include tariffs, and alternative solutions are still being explored for trade routes and production capacity concerns.

There still remains a moderate amount of risk and uncertainty surrounding input costs and inflation levels as the United States’ trade partners continue to engage with the Trump administration on trade policy and country-specific tariff rates.

(1)  Source: Autocare Association
(2) Source: U.S. Bureau of Labor Statistics

Vehicle Affordability & Replacement Factors

According to data reported by Cox Automotive, the average transaction price (ATP) for new vehicles in September 2025 was $50,080, which is the first time this index has surpassed $50,000. Fortunately, average incentive packages on new vehicles increased to 7.4% of ATP in September 2025 compared to 7.2% in September 2024 to partially offset these topline price increases.

During this same time period, used vehicle prices have remained relatively stable year-over-year by only increasing  2.0%.

Despite some good news during the Federal Reserve’s September 2025 meeting that resulted in a 0.25% decrease in the federal funds rate, interest rates for both new and used vehicles remain elevated. As of August 2025, the average financing interest rate on a new vehicle was 9.1% while the average rate on a used vehicle was 13.9%.

As mentioned on previous pages, the tariffs announced by the Trump administration in 2025 will likely place upward pricing pressure on new and used vehicles alike.

(1) Source: Cox Automotive

 

Car Wash Fundamentals

The car wash industry displayed strong, consistent growth during Q1 of 2025 but softened in Q2 and Q3. After stringing together eight consecutive quarters where same-store, year-over-year sales for washes open at least one year exceeded 7.0%, same-store sales increases decelerated to 5.6% and 5.7% in Q2 and Q3 2025, respectively.

Conversion rates of single-wash customers to monthly memberships decreased in Q2 and Q3 2025 from recent quarterly highs set just the quarter prior. Although likely not a surprise, a large deviation in conversation rates exists across the industry. Sites with large membership bases (4,000+ members or more) convert almost five times as many customers to paid memberships than sites with lower memberships (2,000 members or less).

Conversion rates are important to the industry to maintain and grow subscription bases as subscribers are lost to voluntary and credit card-driven churn (membership terminations). Similar to other trends, total monthly churn experienced a reversal of recent positive trends in Q2 and Q3 2025. The best monthly churn statistic measured over the last two years was achieved in Q1 2025 with a total churn of 7.0%. Total churn increased to 7.7% and 7.6% in Q2 and Q3 2025, respectively, due in large part to increases in voluntary churn.

(1)  Source: Rinsed Car Wash Industry Report, which includes data aggregated from over 2,000 car washes
(2) Locations open for 12 months or longer

Publicly Traded Company Performance

Equity Performance

(1)  Source: S&P Capital IQ, figures shown on a total return basis
(2) As of 9/30/2025

 

Public Company Valuations

On an enterprise value (EV) to EBITDA basis (EV/EBITDA), the overall Automotive Aftermarket sector tracked by Matrix has largely moderated over the last two years. With the exception of Parts Retailers & Distributors, which have experienced more volatility than other categories, multiples have oscillated within moderate bands and have remained below the levels seen immediately following the pandemic.

Parts Retailers & Distributors have experienced a peak in valuation multiples since mid-2025 due primarily to continued strong performance of AutoZone and O’Reilly Automotive. Recent strength from Advance Auto Parts has also been a contributing factor following its closure of more than 700 stores, significant earnings beat with respect to its Q1 2025 financial performance, and announcement of 100 new store locations.

Looking ahead, the Automotive Aftermarket index will face significant challenges in returning to the multiples experienced during the pandemic in light of supply chain challenges posed by recent tariff policy.

(1) Source: S&P Capital IQ

 

Public Company Comparable Data^1,2

(1)  Source: S&P Capital IQ
(2) Note: unless noted otherwise, data as of 6/30/2025

(1)  Source: S&P Capital IQ
(2) Note: unless noted otherwise, data as of 3/31/2025

Select M&A & Capital Markets Activity^1,2

(1)  Excludes multi-unit service providers with less than five locations
(2) Source(s): S&P Capital IQ, Pitchbook, Company Press Releases, Internal Matrix Tracking

What We’re Reading

How Vehicle, Auto Parts and Reciprocal Tariffs Fare on Trump’s Aug. 1 Deadline
Aug 1, 2025 – President Donald Trump’s deadline for the imposition of country-by-country tariffs has arrived. By now, some countries with ties to the auto industry have lowered their rates of duty from earlier proposals while others await clarity…

Future of Automotive Aftermarket Auto Repair Costs Spike by 5% Between July and August
Sept 24, 2025 – The latest Consumer Price Index revealed that prices for automotive repair jobs have spiked by 5%…It marks the largest one-month increase on record, and a 15% increase in repair prices from last year. The cause behind the rise can be attributed to a myriad of factors, including tariffs that went into effect this May, shared Skyler Chadwick, director of product consulting for Cox Automotive…

PLT Tire Sales Flat, as Consumers Shift to Value Tiers
Sept 23, 2025 – Circana said that retail unit sales of PLT tires increased 0.4% in the first eight months of 2025 compared with the same period last year. However, there are consumer behavior shifts happening now that may have a longer-term impact on the tire market…Circana affirmed other reports of a slow but steady consumer shift away from higher, premium-tier tires. According to a recent Circana survey, 26% of consumers said that they traded down to a lower-tier or lower-cost tire to save on their most recent tire purchase…

What is the Future of Mobility?
June 24, 2025 – How will people get around in the future? The push toward net zero has already revolutionized the automobile industry, and electric bicycles and scooters are proliferating on city streets—ensuring that over the next 20 years, the only mode of transit that’s likely to stay the same is walking. Whether shared, piloted, aerial, or autonomous, the future of mobility is coming up fast….

 

Automotive Aftermarket Industry Coverage

Disclaimer

The contents of this publication are presented for informational purposes only by Matrix Capital Markets Group, Inc. and MCMG Capital Advisors, Inc. (“Matrix”), and nothing contained herein is an offer to sell or a solicitation to purchase any of the securities discussed. While Matrix believes the information presented in this publication is accurate, this publication is provided “AS IS” and without warranty of any kind, either expressed or implied, including, but not limited to, the implied warranty of merchantability, fitness for a particular purpose, or non‐infringement. Matrix assumes no responsibility for errors or omissions in this presentation or other documents which may be contained in, referenced, or linked to this publication. Any recipient of this publication is expressly responsible to seek out its own professional advice with respect to the information contained herein.