Lexus emerged as the most profitable used car brand for retailers during the final months of 2025, according to data released by Carwow in January 2026. The online car marketplace analysed dealer margins across thousands of transactions, finding that Japanese premium vehicles consistently delivered stronger returns than European rivals, while SUV body styles dominated profitability rankings regardless of brand.
The findings, based on Carwow's proprietary sales data covering October through December 2025, showed Lexus dealers achieved average gross profits of £3,847 per vehicle sold. This exceeded Mercedes-Benz at £3,512, BMW at £3,289, and Audi at £3,156. Mainstream brands trailed considerably, with Ford averaging £1,823 and Vauxhall managing just £1,547 per transaction.
"Lexus combines several factors that maximise dealer profitability," explained Hugo Griffiths, consumer editor at Carwow, in the accompanying report. "Strong residual values mean lower acquisition costs at auction, while the brand's reliability reputation and hybrid technology appeal to buyers willing to pay retail premiums. Dealers enjoy healthy margins without extensive reconditioning expenses that erode profits on less reliable marques."
The data revealed that SUVs accounted for seven of the ten most profitable individual models sold through Carwow's platform during the period. The Lexus RX topped the list with average dealer margins of £4,621, followed by the Range Rover Sport at £4,508 and the Porsche Cayenne at £4,391. Traditional saloons struggled by comparison, with the BMW 3 Series managing £2,847 and the Mercedes E-Class achieving £2,934.
This SUV dominance reflects broader market trends that have reshaped automotive retailing over the past decade. According to the Society of Motor Manufacturers and Traders, SUVs represented 54.3 percent of new car registrations in Britain during 2025, up from 51.2 percent in 2024 and just 21.8 percent in 2015. This new car appetite filters through to used markets, where SUV demand remains robust even as vehicles age.
Lexus's profitability advantage stems partly from limited supply. The brand sells relatively few vehicles in Britain compared to German premium competitors, creating scarcity in used markets. SMMT data shows Lexus registered 12,347 new cars in 2025, while BMW registered 141,589, Mercedes-Benz 118,742, and Audi 95,631. This volume disparity means used Lexus inventory remains tight, supporting stronger pricing.
The hybrid factor also contributes significantly. Lexus committed to hybrid technology decades before European manufacturers, with every model in its current range offering petrol-electric powertrains. As buyers increasingly seek alternatives to pure combustion engines but remain hesitant about full battery electric vehicles, Lexus hybrids occupy a sweet spot. This demand translates to dealer pricing power.
Carwow's analysis found that hybrid vehicles generally commanded 8.3 percent higher dealer margins than equivalent petrol or diesel models across all brands. A hybrid Toyota RAV4 averaged £2,789 dealer profit versus £2,341 for the diesel equivalent. The premium reflects both stronger buyer demand and lower depreciation rates for hybrid technology.
Reliability plays a crucial role in profitability calculations. Dealers purchasing used stock at auction factor reconditioning costs into their bids. Brands with reputations for expensive repairs or common faults require lower acquisition prices to offset anticipated warranty claims and preparation expenses. Lexus consistently ranks among the most reliable brands in surveys by What Car?, JD Power, and Consumer Reports, meaning dealers face minimal reconditioning costs beyond routine servicing and cosmetic attention.
"A three-year-old Lexus RX typically needs a valet, fresh MOT, and perhaps new tyres," said Simon Richards, used car manager at a London dealership group speaking to Carwow for the report. "Compare that to a German premium SUV where we might face £2,000 in repairs for air suspension faults, electronics gremlins, or diesel emissions equipment failures. That £2,000 comes straight off our margin unless we paid less at auction, which we obviously try to do."
The data also highlighted regional variations in profitability. London and Southeast dealerships achieved margins averaging 12.4 percent higher than the national mean, reflecting wealthier demographics and stronger demand for premium vehicles. Northern regions and Wales showed margins 7.8 percent below average, where buyers prove more price-sensitive and premium brand appeal diminishes.
Age and mileage patterns revealed interesting dynamics. Vehicles aged three to five years delivered the strongest margins, averaging £3,421 across all brands. Newer examples under three years old managed only £2,847, likely because depreciation from new remains steep and buyers can often negotiate better deals. Older vehicles over seven years commanded £2,134, reflecting lower absolute prices that limit margin potential despite potentially strong percentage returns.
The Lexus NX, the brand's compact SUV, proved particularly profitable for dealers despite lower absolute prices than the larger RX. Average margins reached £3,956, suggesting the model occupies a pricing bracket where buyers stretch budgets for premium badges but lack the negotiating sophistication of more expensive segments.
German brands' lower profitability relative to Lexus surprised some industry observers, given their premium positioning and strong residual values. However, Carwow's analysis suggests this reflects higher acquisition costs at auction, where competition for desirable German stock drives bidding up, and greater reconditioning expenses offsetting retail pricing power.
"A clean BMW X5 with full service history attracts fierce auction bidding," Griffiths noted. "Dealers might pay £28,000 for a vehicle they'll retail at £32,000. That £4,000 gross gets eaten by £800 in reconditioning, £400 in warranty provision, and £600 in advertising and overhead. Net margin drops to perhaps £2,200. A Lexus RX purchased for £23,000 and retailed at £27,500 needs minimal work, leaving more of that £4,500 gross as actual profit."
Electric vehicles showed mixed profitability. Tesla models averaged £2,641 dealer margin, respectable but unremarkable, while Polestar managed just £1,923. The data suggests electric car markets remain volatile, with rapid depreciation and uncertain demand making inventory risky. Dealers discount aggressively to move electric stock rather than holding vehicles while battery technology advances and buyer preferences shift.
Carwow's findings carry implications for manufacturers and dealers alike. Brands achieving strong used profitability create dealer loyalty, as retailers prioritise stocking vehicles that deliver returns. This can influence new car franchising decisions and marketing support allocation. Lexus's used profitability potentially compensates for lower new car volumes, maintaining dealer network health.
For buyers, the data suggests negotiation opportunities. Brands and models delivering thin dealer margins might offer better deals, as retailers have less room to discount. Conversely, high-margin vehicles like Lexus SUVs indicate dealers can potentially negotiate more while still achieving acceptable returns.
The report arrives as automotive retail faces significant challenges. Electric vehicle transition uncertainty, fluctuating interest rates affecting finance penetration, and economic headwinds all pressure dealer profitability. Identifying which brands and segments deliver consistent margins helps retailers navigate turbulent markets.
Whether Lexus maintains its profitability crown into 2026 depends on multiple factors including supply levels, continued hybrid demand, and competitor responses. BMW and Mercedes-Benz have expanded hybrid offerings recently, potentially eroding Lexus's technology advantage. However, the Japanese brand's reliability reputation and relatively limited supply suggest its margin premium may prove sustainable.
SUV dominance appears more certain to continue. Buyer preferences have shifted decisively toward higher-riding vehicles, and nothing suggests reversal. Dealers will continue prioritising SUV stock, accepting lower margins on saloons and estates as necessary evils to maintain brand representation rather than profit centres in their own right.
The used car market remains a crucial profit source for automotive retailers, often generating more consistent returns than new car sales with their thin margins and manufacturer pressure. Understanding which brands and models deliver strongest profitability helps dealers optimise stock selection and pricing strategies. Carwow's data suggests that Japanese reliability, hybrid technology, and SUV body styles represent the current formula for maximising returns, with Lexus embodying all three characteristics more completely than any competitor.