THE ECONOMY REMAINS CHALLENGING, BUT CONSUMERS ARE ADAPTING Coles began with a look at the broader economy, noting elevated consumer debt levels, persistent inflation and continued uncertainty around employment and interest rates. While inflation reached 4.2% in May and fuel prices remained a significant contributor, Coles encouraged dealers to focus less on short-term volatility and more on long-term trends. “The reality is the K-shaped economy that has been talked about for the last five years is very much coming into play in the service drive and in the sales department in each of your dealerships,” he said. That divergence creates different experiences for different consumers. Some continue purchasing newer vehicles, while others are increasingly focused on affordability. MARGIN COMPRESSION IS NO LONGER TEMPORARY The most important chart in Coles’ presentation may have been ACV’s Retail Profit Index, which tracks dealership profitability against inflation-adjusted pre-pandemic levels. The chart tells a simple story: The exceptional profits generated during the inventory shortages of the COVID era are fading, and dealership profitability is moving back toward historical norms. “The new normal for dealers, margin compression is structural. It’s not temporary,” Coles said. Many managers entered the industry during a period when inventory was scarce, and front-end grosses reached unprecedented levels. As those conditions disappear, dealerships are facing what Coles described as a “massive retraining and mindset course correction.” “That’s a very real friction that we’re seeing right now in stores,” he said. DEALER DATA SCIENTIST CONVENTION SPEAKER Dealers Can’t Wait for the Old Market To Come Back Insights from John Coles, Ph.D., of ACV Stop waiting for things to go back to the way they were. That was the message delivered by John Coles during his presentation at VADA ‘26. The vice president of data science and analytics spent much of his session examining economic indicators, used-vehicle trends and artificial intelligence, but his message was ultimately about adaptation. Dealers who continue measuring today’s market against the extraordinary conditions of 2021 and 2022 are preparing for a future that no longer exists, he said. “Running a business with uncertainty is the new normal,” Coles said. That divergence is creating different experiences for different consumers. Some continue purchasing newer vehicles, while others are increasingly focused on affordability. The annual inflation rate in the U.S. rose to 4.2% in May 2026, marking its highest level since April 2023. Gasoline prices soared 40.5%, after a 28.4% gain. Fuel oil also increased 58.9% (vs. 54.3%). 14 Virginia Auto Dealer
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