Part 1 of 14: The Employee-Customer-Profit Connection
In this article, you'll learn:
– Why employee turnover is the biggest hidden cost in automotive retail
– How it directly impacts CSI, profitability, and growth
– How leading dealerships are proving this problem is solvable, not inevitable
The automotive retail industry loses money to employee turnover—conservatively estimated at $20 billion annually.¹ That's not a typo. Twenty billion dollars—gone every year to recruiting, training, lost productivity, and the invisible costs nobody bothers to calculate.
And yet, when dealer principals and GMs gather at conferences and 20 Groups, the conversation rarely lingers on this. The assumption seems to be that high turnover is just part of the business. Cost of doing business. The way it's always been.
Meanwhile, those same leaders will spend hours dissecting their CSI scores, agonizing over a two-point drop, implementing new processes to capture every last customer satisfaction point.
Here's what I keep coming back to: unhappy employees cannot generate happy customers. It's that simple. And that complicated.
The Numbers Nobody Wants to Talk About
The latest NADA Dealership Workforce Study—based on data from nearly 2,500 dealerships and over 246,000 payroll records—shows industry-wide turnover running at 42% annually.² In non-luxury stores, that number climbs to 45%. That means nearly half your workforce is gone every year.
For sales consultants, it's far worse. Non-luxury dealerships are now seeing 73% turnover—up 13 percentage points from the previous year. That's nearly three out of four salespeople not making it twelve months. Even luxury stores, which traditionally perform better, hit 42% sales consultant turnover.
Think about what that means for customer experience. The salesperson who helped a customer last year? Probably gone. The service advisor who built a relationship over three visits? Good chance they've moved on. The technician who finally mastered the quirks of a particular vehicle line? Now installing in-home EV chargers or maintaining helicopters—taking those skills to industries that figured out how to keep their people.
Every departure takes institutional knowledge out the door. Every new hire starts from zero—learning your systems, your culture, your customers. And customers feel it. They notice when they're dealing with someone new every time. They sense when the person helping them is still figuring things out.
The Cost Goes Deeper Than Recruiting
Most dealers, when they think about turnover costs at all, think about recruiting and training. The job postings, the interviews, the onboarding. Those costs are real, but they're just the surface.
The deeper costs hide in places that don't show up on a spreadsheet.
Lost customer relationships. A service advisor who's been building trust with your customers for three years takes those relationships when they leave. Some customers follow them. Others just drift away, no longer feeling that sense of connection to your store.
Inconsistent service delivery. New employees make mistakes experienced ones don't. They miss opportunities to upsell because they don't yet know what to look for. They handle difficult situations clumsily because they haven't developed the instincts yet.
CSI volatility. You implement a new process, scores improve, then half the team that learned it leaves and you're starting over. The cycle repeats endlessly.
Management time. How many hours do your managers spend interviewing, onboarding, coaching new people through their first 90 days—only to watch them walk out and start the cycle again? That's time not spent developing your strong performers or improving operations.
Team morale. Constant turnover wears on the people who stay. They're perpetually training someone new, picking up slack during transitions, watching colleagues come and go. Eventually some of them start wondering if they should leave too.
The Question Nobody's Asking
Here's what strikes me about how the industry approaches this: we measure everything about customer satisfaction and almost nothing about employee experience.
Dealers have sophisticated systems tracking CSI scores, service throughput, sales conversion rates, gross profit per unit. They can tell you exactly how they're performing against OEM standards and regional benchmarks.
Ask those same dealers about their employee engagement levels, their turnover rate by department, their average tenure by position—and many can't answer with any confidence. They might have a general sense. They might know it's "not great." But the precision they bring to customer metrics vanishes when the subject turns to their own people.
This is the disconnect that costs the industry $20 billion a year.
The Dealers Who've Figured This Out
Not every dealer accepts high turnover as fate.
Penske Automotive Group routinely has more dealerships on Automotive News' Best Dealerships to Work For rankings than any other publicly traded dealer group.³ That doesn't happen by accident—it happens because they've made employee experience a strategic priority.
Bergstrom Automotive in Wisconsin has consistently ranked among the top dealerships nationally on that same list.⁴ Their approach to culture and employee development has made them a regional powerhouse with fiercely loyal teams.
These aren't small operators with unusually close-knit teams. Penske has 350+ locations globally. Bergstrom has 2,500 employees across 40 dealerships.
They've proven that the "high turnover is inevitable" narrative is false. It's a choice. One that most of the industry keeps making by default, because changing it requires actually paying attention to something they've learned to ignore.
Where This Series Is Going
Over the next 13 weeks, I'm going to dig into what separates the dealers who've cracked this code from the ones still hemorrhaging talent and wondering why their CSI scores won't stabilize.
We'll look at what's actually working—the culture practices, the compensation innovations, the career pathways, the leadership approaches. We'll examine why some well-resourced dealers still struggle with retention despite having impressive programs on paper. We'll talk about the generational shifts that are reshaping workforce expectations and why the old playbook doesn't work anymore.
And we'll address what this means for OEMs, who depend on dealer-level execution but often have limited visibility into the workforce stability that makes execution possible.
Most importantly, we'll talk about measurement. Because the dealers winning this battle aren't guessing about what their people need. They're tracking it, analyzing it, and responding to what the data tells them.
The $20 billion problem is solvable. But it requires caring about it enough to actually measure it—and then doing something with what you learn.
That's what this series is about.
The dealers outperforming on retention aren't guessing—they're measuring. ESi-Q powers the NADA Dealership Workforce Study and helps dealerships understand their employee value proposition, measure engagement, and track the metrics that connect workforce stability to business results.
About the Author
Cathy Palochko has spent her career in learning and development almost exclusively in automotive, including senior leadership roles in training and development for multi-franchise dealer groups and extensive experience on the agency side supporting OEMs.
Frequently Asked Questions
How much does employee turnover cost the automotive retail industry?
Employee turnover costs the automotive retail industry an estimated $20 billion annually. This calculation is based on 16,500 U.S. franchised dealerships with an average of 64 employees each, 42% industry turnover, and replacement costs of approximately 50% of annual salary per SHRM and Gallup benchmarks.
What is the average employee turnover rate at car dealerships?
The 2025 NADA Dealership Workforce Study reports 42% overall turnover in automotive retail, with non-luxury dealerships at 45% and luxury dealerships at 30%. Sales consultant turnover is significantly higher—73% for non-luxury stores and 42% for luxury stores.
Why is dealership turnover so high?
High turnover in automotive retail stems from multiple factors: commission-heavy compensation creating income instability, demanding schedules including mandatory weekends, limited career pathways, sink-or-swim training approaches, and an industry culture that has historically accepted turnover as inevitable rather than treating it as a solvable problem.
Can dealerships actually reduce turnover?
Yes. Dealers like Penske Automotive Group and Bergstrom Automotive consistently achieve dramatically better retention than industry averages. They've proven that high turnover isn't inevitable—it's the result of choices about compensation, culture, development, and leadership that any deal
Footnotes:
¹Based on 2025 NADA Dealership Workforce Study data: 16,500 U.S. franchised dealerships × 64 average employees × 42% turnover rate × $49,323 replacement cost per employee (50% of $98,645 average annual earnings, per SHRM and Gallup benchmarks estimating replacement costs at 50-200% of salary).
²2025 NADA Dealership Workforce Study
³Automotive News Best Dealerships to Work For rankings
⁴Automotive News Best Dealerships to Work For; Bergstrom Automotive