In this article, we will look at the 8 Best Car Repair Stocks to Invest In.
An Overview of the Global Automotive Aftermarket Industry
According to a report by Fortune Business Insights, the global automotive aftermarket industry was valued at $418.95 billion in 2023. The market is expected to reach $568.19 billion by 2032. The acceptance of electric and hybrid vehicles is expected to propel the growth in demand for related aftermarket products. Moreover, the rise in automotive e-commerce is also contributing to increased sales in the market. As a result, major players in the industry are developing their omnichannel platforms to facilitate online automotive aftermarket services.
The KPMG Corporate Finance recently released its automotive aftermarket report for the fiscal third quarter of 2024. The report highlights that the decline in new car purchases can lead to growth for the aftermarket industry. Despite the recent cut in the Federal Reserve’s interest rates, experts believe new car purchases may not see an immediate uptick. This is because auto loan interest rates typically adjust slowly, thereby remaining high even after the Fed’s actions. Currently, average auto loan rates are still exceeding 9.61% for new vehicles and nearly 14% for used vehicles, which poses a significant barrier to new car purchases. As a result, many consumers are opting to defer vehicle purchases and are increasingly relying on the aftermarket for more affordable maintenance and repair solutions to extend the lifespan of their existing vehicles.
Moreover, the gradual adoption of battery-electric vehicles (BEVs) and software-defined vehicles is reshaping the automotive aftermarket landscape. While these advancements may lead to less frequent maintenance needs, they also introduce new service requirements related to battery systems and advanced electronics. According to forecasts from Bank of America Global Research, BEVs are expected to comprise about 8% of total vehicle sales in 2024, increasing to approximately 29% by 2030.
While analyzing the performance of the industry during the quarter, the report highlighted that the S&P 500 Index and Dow Jones Industrial Average (DJIA) saw significant growth over the past year, up 34.4% and 26.6%, respectively. The Automotive Aftermarket Index grew at a slower pace of 14.3%. However, it is noteworthy that in Q3 2024, this index outperformed both major indices with a growth rate of 8.4%. Specific segments within the aftermarket showed varied performance. For instance, the Parts Suppliers grew by 13.1% while Retailers & Distributors grew by 8.9%. The Enthusiast Products segment rebounded with an 11.3% increase after earlier declines, whereas Service Providers experienced a slight decline of 3.2%.
Regardless of the challenges stemming from high interest rates and inflation the automotive aftermarket has shown resilience and proved to be recession-proof. The shift towards maintaining older vehicles rather than purchasing new ones, combined with technological advancements in vehicle types is fueling growth in the industry. Moreover, trends suggest that while immediate growth in new car sales may be sluggish, there remains a robust demand for aftermarket services and products as consumers adapt to changing economic conditions.
With that let’s take a look at the 8 best car repair stocks to invest in.
An auto repair shop with a car in the foreground, demonstrating the need for comprehensive automobile coverage.
Our Methodology
To curate the list of 8 best car repair stocks to invest in, we used the Finviz stock screener and other listings on the internet. Using our sources we aggregated a list of car repair stocks sorted by market capitalization. Next, we ranked these stocks by the number of hedge fund holders sourced from Insider Monkey’s third-quarter hedge funds database.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
8 Best Car Repair Stocks to Invest In
8. Genuine Parts Company (NYSE:GPC)
Number of Hedge Fund Holders: 27
Genuine Parts Company (NYSE:GPC) is a major global service provider that focuses on distributing replacement parts for both the automotive and industrial sectors. Its Automotive Part Group is one of the largest parts of the company as it generates more than 60% of the total revenue. The segment distributes a wide range of replacement parts for cars, trucks, and other vehicles, excluding body parts. Its automotive parts are available across North America, Europe, and Australasia, serving both individual customers and large businesses like repair shops and fleet operators.
The company operates its automotive parts business under the brand name NAPA, which includes around 2,000 company stores and around 4,800 independently owned stores in North America. Oakmark Equity and Income Fund in its Q3 2024 investor letter stated that Genuine Parts Company (NYSE:GPC) has a robust network of broad nationwide coverage, which translates as a difficult-to-replicate asset, thereby giving the company a competitive edge over its competitors.
Genuine Parts Company (NYSE:GPC) had a tough fiscal third quarter of 2024 with its Industrial segment global sales decreasing 1.1% year-over-year. However, its Automotive segment controlled the damage by a 2% increase during the same time resulting in total sales for the company growing 0.8% to reach $6 billion. Moreover, during the quarter management also completed the acquisition of MPEC, which is the independent owner in the US with 181 stores. The acquisition significantly increases GPC’s footprint in the automotive parts market by adding a substantial number of stores. This aligns with GPC’s strategy to own more of its stores and reduce reliance on independent owners, moving towards a more balanced ownership model.
Oakmark Equity and Income Fund stated the following regarding Genuine Parts Company (NYSE:GPC) in its Q3 2024 investor letter:
“Genuine Parts Company (NYSE:GPC) is a distributor of automotive and industrial replacement parts. The company primarily operates under the NAPA brand name in the automotive market and Motion Industries in the industrials market. The two business segments address different end markets but share some attractive traits. In both markets, the majority of sales are replacement parts, which leads to steady demand and dampened cyclicality. Customers often prioritize speed and service over price, which promotes a rational competitive pricing environment. Additionally, both markets are fragmented, with GPC representing one of a handful of scale players competing against a long tail of independent operators. The NAPA ecosystem, which includes nearly 2,000 company-owned stores and nearly 4,800 independently owned stores in North America, is a difficult-to-replicate asset that offers broad coverage nationwide. We see opportunity for the store base to operate more efficiently as management’s recent investments start to bear fruit. Motion Industries is the clear leader in its niche with roughly twice the revenue base of the closest direct competitor, and it differentiates itself via its technical salesforce and network density. Historically, GPC has consistently earned high returns on capital and supplements solid organic growth with value-accretive tuck-in acquisitions. The stock trades at a sizeable P/E discount to peers and the broader market, which we view as an attractive entry point.”
7. Asbury Automotive Group, Inc. (NYSE:ABG)
Number of Hedge Fund Holders: 30
Asbury Automotive Group, Inc. (NYSE:ABG) is an international automotive retailer based in the United States. The company primarily operates by selling vehicles and providing car parts and repairing services. Its Total Care Auto segment, powered by Landcar, is a significant component of its business model, specializing in service contracts and other vehicle protection products. The segment operates 37 collision repair centers in 14 states across the country.
During the third quarter, Madison Mid Cap Fund announced adding Asbury Automotive Group, Inc. (NYSE:ABG) to its portfolio. The firm stated that while the company owns a diversified portfolio of dealerships, its Parts and Services business tends to earn more profits. The anticipation by Madison stood true as during the fiscal third quarter results delivered $4.2 billion in revenue, up 16% year-over-year. While the revenue growth was driven by a 16% increase in new vehicle sales and a 13% increase in used vehicle sales, both components reported 11% and 6% decreases in gross profits. On the other hand, its Parts and Services segment not only grew revenue by 13% but also improved gross profits by 16%. The segment provided damage control to the overall gross profit which decreased only 142 bps year-over-year. It is one of the best car repair stocks to invest in.
Madison Mid Cap Fund stated the following regarding Asbury Automotive Group, Inc. (NYSE:ABG) in its Q3 2024 investor letter:
“During the quarter we added three new holdings: Graco, Lithia Motors, and Asbury Automotive Group, Inc. (NYSE:ABG). We purchased shares in Lithia Motors and Asbury Automotive, two of the largest auto franchise dealer groups in the country, owning a diversified portfolio of dealerships ranging from Toyota to Ford to Mercedes. Investors tend to pay a lot of attention to the level of new car sales, but dealers actually earn more in profits from parts and service than they do from selling new cars, and this steady business provides a nice ballast throughout the economic cycle. In addition, we believe these businesses have a long runway to create value via consolidation of this fragmented industry, as the advantages of scale are increasing.”
6. AutoNation, Inc. (NYSE:AN)
Number of Hedge Fund Holders: 32
AutoNation, Inc. (NYSE:AN) is a major automotive retailer in the United States. The company operates through a network of franchises that sell both new and used vehicles. The company deals in Domestic, Import, and Premium Luxury segments with franchises in each segment selling parts and offering repair services to customers.
The company had a rough fiscal third quarter of 2024, characterized by a CDK outage, which is a major software used by various players in the industry. Its net revenue decreased 4% year-over-year to $6.6 billion, whereas the gross profit also dipped 9% during the same time. However, on the bright side AutoNation, Inc. (NYSE:AN) Customer Financial Services segment and After-Sales segment, led the gross profit 2% higher on a subsequent basis.
Management noted that its After-Sales segment, which deals with parts and repairing services has been showing continuous momentum despite the CDK outage. While the overall revenue of the company dipped, the segment revenue improved by around 1% year-over-year. More importantly, the segment profit margins showed a 50 bps improvement during the same time led by improved parts and labor rates, leverage, and higher value orders. Looking ahead, management notified of improving technician headcount thereby further boosting productivity within the segment. It is one of the best car repair stocks to invest in now.
Conventum – Alluvium Global Fund stated the following regarding AutoNation, Inc. (NYSE:AN) in its Q2 2024 investor letter:
“AutoNation, Inc. (NYSE:AN) (down 3.7%) operates around 350 dealer franchises across the US, as well as collision centres and used vehicle stores. When compared to Group 1, it sells more units at a slightly higher price and margin, and derives around 50% more revenue. But its strategy is different, with nationwide branding and centralised operations. Although we prefer the Group 1 model, the economics of Autonation look attractive to us. And by introducing this into the portfolio we could thereby invest more than 5% of assets in this sector without necessitating the sale of other attractive large positions. And so after selling a little Group 1 and buying Autonation we ended the quarter with 4.1% and 1.9% positions respectively.”
5. Valvoline Inc. (NYSE:VVV)
Number of Hedge Fund Holders: 35
Valvoline Inc. (NYSE:VVV) specializes in automotive preventive maintenance services. The company is known for its 15-minute oil change service, allowing customers to stay in their cars while the oil is changed. They also provide a range of other services, including battery replacements, wiper blade replacements, air filter replacements, and more. They operate over 2,000 service centers across the United States and Canada, including franchises like Valvoline Instant Oil Change and Great Canadian Oil Change.
The company exercises its competitive edge coming from its strong brand recognition, operational excellence, and proprietary technology. During the fiscal fourth quarter of 2024, it reported system-wide store sales of $3.1 billion, marking a 12% increase from the previous year. Valvoline Inc. (NYSE:VVV) achieved its 18th consecutive year of same-store sales growth, with a 6.7% increase from the previous year. An increase in same-store revenue also resulted in Adjusted EBITDA increasing 17% during the same time with an improved EBITDA margin of 27.3%.
The company has plans to accelerate its network growth, it aims to open 250 new stores per year by 2027. In fiscal 2024, it opened 158 new stores, including significant franchising efforts. Moreover, the company has also been gaining new customers, management noted that approximately 20% of its customers are new, primarily attracted by the convenience and speed of services offered. It is one of the best car repair stocks to invest in.
FMI made the following comment about Valvoline Inc. (NYSE:VVV) in its Q3 2023 investor letter:
“After a long history of underinvestment under Ashland and a messy seven years as a standalone public company, Valvoline Inc. (NYSE:VVV) is finally a pure-play quick lube retailer, having sold their motor oil business earlier this year. We like the business model for its stability, growth potential, pricing power, and high returns on capital. The business offers customers a better oil change experience relative to the alternatives. Going forward, the story will be simpler to understand, the analyst coverage will be uniform, and it should get reclassified as retail. In the current environment, Valvoline has the added benefit of having a tight store-level culture that helps minimize labor turnover, and has effectively no shrink, which is currently a major thorn in the side of retailers. Given Valvoline’s choppy history (thanks to the divested motor oil business), we believe investors are in a wait and see mode as the company proves out its standalone financial results and accelerates its organic store expansion. Increased penetration in a fragmented market, expanded usage of synthetic oils, and a consistent experience as consumers continue to shift to do-it-for-me, should drive strong earnings per share growth at high incremental returns. Although we believe we can get an attractive return from just the growth, there is the chance for a higher valuation as Valvoline puts up its first year of (nearly) clean financials in Fiscal Year 2024. We also believe the short- to medium-term threat of electric vehicles is manageable. If our growth expectations are achieved, the downside is modest even if the multiple compresses meaningfully over our five-year investment horizon. We expect investors will increasingly appreciate Valvoline’s simple, high return model after a long period of being obfuscated by inferior businesses.”
4. LKQ Corporation (NASDAQ:LKQ)
Number of Hedge Fund Holders: 36
LKQ Corporation (NASDAQ:LKQ) specializes in distributing vehicle products. It supplies various types of vehicle parts that can replace damaged or worn-out components including aftermarket parts, OEM parts, and recycled parts. The company operates through Wholesale-North America, Europe, Speciality, and Self Service segments.
The company is focusing on simplifying its operations to improve returns. Recently, it sold its operations in Poland and Bosnia, which were deemed loss-making, allowing management to concentrate on more profitable areas. It is also actively reviewing its cost structures across all businesses to enhance efficiency. This includes closing underperforming locations and rationalizing product offerings in Europe. Despite these initiatives, LKQ Corporation (NASDAQ:LKQ) faced challenges in revenue growth. Its Parts and services revenue declined by approximately 4% on a per-day basis, with North America experiencing a decline of 7.5%.
However, regardless of the softness, management was able to grow its fiscal third quarter revenue by 0.5% year-over-year to reach $3.6 billion. Its adjusted net income for the quarter declined slightly from $231 million in Q3 2023 to $230 million in the latest quarter. Management ended the quarter with $661 million in free cash flow. Artisan Mid Cap Value Fund in its second-quarter investor letter noted that LKQ Corporation (NASDAQ:LKQ) might not be the fastest-growing business among its peers, however, it has gained investor attention by becoming the largest mechanical parts distributor in Europe. This gives the company a significant strategic edge making it one of the best car repair stocks to invest in.
Artisan Mid Cap Value Fund stated the following regarding LKQ Corporation (NASDAQ:LKQ) in its Q2 2024 investor letter:
“In the health care and consumer discretionary sectors, Baxter International and LKQ Corporation (NASDAQ:LKQ) were key detractors. LKQ is the dominant player in salvage/aftermarket collision parts distribution in North America, with over 70% market share. In addition to continued cost inflation, lower-than-expected collision claims in North America due partly to a mild winter resulted in disappointing quarterly earnings. What was already a cheap stock when we initiated our position in January of this year has become even cheaper. At a 10X P/E, shares trade at a distinct discount to their historical 10-year average of 14X and are also cheaper relative to LKQ’s auto parts retailer peers, which arguably have similar long-term growth profiles. LKQ isn’t a fast-growing business, but it can grow 2% to 4%, and given its dominant market share and mid-teens return on tangible capital, we believe it should trade at a higher valuation. Over the last decade, LKQ has also become the largest mechanical parts distributor in Europe. As is the case in North America, independent European mechanics value LKQ’s reliable distribution and competitive pricing. The European business has improved operationally over the last five years as LKQ has focused on the integration of its various acquisitions to drive margin and free cash flow improvements. LKQ operates in end markets with limited cyclicality as 90% of revenues are tied to non-discretionary spending and reliably has strong free cash flow generation. The company also meets our requirement for a sound financial condition as its debt load is manageable at 2X EBITDA due to its attractive free cash flow. We added to our position on weakness.”
3. Group 1 Automotive, Inc. (NYSE:GPI)
Number of Hedge Fund Holders: 40
Group 1 Automotive, Inc. (NYSE:GPI) is an international car retailer primarily operating in the United States and the United Kingdom. It owns around 338 franchises, 260 dealerships, and 44 collision centers, specializing in vehicle repairs after accidents. The company also operates AcceleRide, an omnichannel that facilitates the buying and selling of vehicles.
Group 1 Automotive, Inc. (NYSE:GPI) proved to be resilient in dealing with the CDK outage. It generated an all-time quarterly high of $5.2 billion in revenue, up 11% year-over-year. Its Parts and Services segment, which deals with car repairing, led the growth by improving 16% during the same time. Conventum – Alluvium Global Fund in its Q3 2024 investor letter mentioned that the company has remained resilient in a tough market environment. It has been growing its dealership network within the United States and the United Kingdom. For instance, management announced the acquisition of Inchcape’s retail operations, four Mercedes-Benz dealerships, and a large BMW store in Lincoln. The expansions will add 54 dealerships to its portfolio and allow the company to make around $2.7 billion in annual revenue from merely Inchcape’s retail operations. It is one of the best car repair stocks to invest in.
Conventum – Alluvium Global Fund stated the following regarding Group 1 Automotive, Inc. (NYSE:GPI) in its Q3 2024 investor letter:
“Group 1 Automotive, Inc. (NYSE:GPI) was up 29.0%. Its second quarter results appeared to be above market expectations. We mentioned in our last report that US car dealers were heavily affected by the CDK software outage, but it seems Group 1 fared better than most. And now, with the 54 Inchcape dealership acquisition about to close (which will double its UK size and add USD 2.7b to revenue), we have updated our analysis. The result? Well despite becoming a larger entity with an expected 25% increase in revenue and 30% increase in earnings, there is negligible change to our valuation. Notwithstanding, we have no reason to doubt management’s confidence in the merits of the transaction. The numbers do not always tell the full story (or even part of it), and to us it makes sense to build scale in the UK. After the price gain, the business now trades at a small premium to our valuation. Not enough, in our view, to warrant major selling but when it reached 5.0% of the Fund we sold a little (to end the quarter at 4.2%) and we increased our position in Autonation (up 12.3%) which we consider slightly cheaper.”
2. Lithia Motors, Inc. (NYSE:LAD)
Number of Hedge Fund Holders: 43
Lithia Motors, Inc. (NYSE:LAD) is a major automotive retailer that operates a vast network of dealerships and online platforms to sell vehicles and provide related services, including repair services. It operates more than 467 stores across the United States, Canada, and the United Kingdom.
The company has been actively expanding its dealership network and improving its financial performance. On September 10, it announced the acquisition of three dealerships from Duval Motor Company in Florida. Management expects to generate over $200 million in annual revenue from the acquisition, significantly enhancing the company’s presence in the region. For the fiscal third quarter of 2024, Lithia Motors, Inc. (NYSE:LAD) reported record revenues of $9.2 billion, which is an 11% increase from $8.3 billion in the same quarter of 2023. This growth reflects the company’s successful strategies in expanding its operations.
Management is not only expanding its dealership footprint through strategic acquisitions but is also enhancing its financial health by increasing revenues and improving cost management. It successfully reduced its SG&A expenses from 67.9% of gross profit in the second quarter to 66% in the third quarter of 2024. It is one of the best car repair stocks to invest in.
Appalaches Capital stated the following regarding Lithia Motors, Inc. (NYSE:LAD) in its Q3 2024 investor letter:
“Lithia Motors, Inc. (NYSE:LAD) reported earnings, which were expectedly weaker year-over-year, but results were still better than feared. The shares have run up quite a bit since our initial purchase, but we still own them at a price at which I believe is a significant discount to their intrinsic value.”
1. CarMax, Inc. (NYSE:KMX)
Number of Hedge Fund Holders: 44
CarMax, Inc. (NYSE:KMX) is a major retailer of used cars in the United States, operating primarily through two main areas namely CarMax Sales Operations and CarMax Auto Finance (CAF). While it is renowned for its buying and selling of used cars, the company also sells additional products such as warranties and vehicle repair services.
During the fiscal third quarter of 2025, the company witnessed year-over-year increases in the number of cars sold both at retail and wholesale levels, indicating a robust demand for used vehicles despite some challenges in the market. Its total retail used vehicles sold increased by 5.4%, whereas wholesale vehicle units sold increased by 6.3% year-over-year. Although there was a decline in average selling prices, which dropped by about $1,100 per vehicle, approximately 4% year-over-year. CarMax, Inc. (NYSE:KMX) managed to maintain strong profit margins. Management noted an improvement of $10 million in service gross profit, which led its total gross profit to $677.6 million, up 10.6% versus last year’s third quarter.
Looking ahead, management is focusing on growing its operations digitally. During the third quarter around 15% of the total retail units were sold through its omnichannel, with digital transactions making 32% of the net revenue. It is the best car repair stock to invest in.
Madison Mid Cap Fund stated the following regarding CarMax, Inc. (NYSE:KMX) in its Q3 2024 investor letter:
“We trimmed our positions in Moelis and CarMax. We reduced our position in CarMax, Inc. (NYSE:KMX) coincident with our addition of the two automotive retailers. While we are positive on CarMax’s prospects, we want to ensure we manage our portfolio’s overall exposure to the new and used car markets.”
While we acknowledge the potential of CarMax, Inc. (NYSE:KMX) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KMX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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