Regular updates on issues important to the Auto Dealer industry
With the federal government just reopening, the latest SAAR data isn’t yet available. In the meantime, we take a closer look at the fundamentals that truly drive dealership value, from franchise and facilities to management depth and earnings quality, and share insights from our whitepaper, “Understand the Value of Your Auto Dealership.”
Part 2 of our reinsurance series examines how captives figure into valuation and planning for auto dealer groups. We contrast the risk and return profiles of dealership operations, real estate, and reinsurance entities, and outline how disciplined analysis—of underwriting performance, capital needs, and recapture economics—can unlock estate planning advantages and creative transaction structures.
Auto dealerships are complex businesses with revenue streams ranging from new and used vehicle sales to service, parts, and F&I (finance and insurance). Within F&I, one of the most under appreciated opportunities for wealth creation is reinsurance. While some dealers have operated reinsurance companies for years, others rely solely on commissions from third-party product providers. In the first blog of this series, we introduce the basics of reinsurance in the context of auto dealerships and explore both the pros and cons of establishing a reinsurance company.
In August 2025, the U.S. auto industry slowed as the SAAR of 16.1 million units represented a 2.9% decrease from the prior month. However, the trend of year-over-year increases continued, as eleven of the past twelve months have beat the prior year, with a 6.2% increase from August 2024. The August 2025 performance is particularly impressive given the inflated baseline from the previous year’s CDK software outage that shifted sales into July and August 2024. Read more in this week’s post.
In this week’s post, we cover what auto retailer executives had to say during the Q2 2025 earnings calls. We noted three major themes from last quarter’s calls, which we detail below: tariffs, acquisitions, and fixed operations.
The July 2025 SAAR came in at 16.4 million units, up 7.1% from last month and up 3.7% from July 2024. It is important to note that this modest year-over-year gain requires a bit more context due to irregularly high sales this time last year. Looking forward, Mercer Capital expects the August 2025 SAAR to end up near the June 2025 SAAR. As tariff-related uncertainty persists, it is likely that supply chain, sales volumes, profits, and blue sky multiples will remain under pressure in the coming months.
In Part 1 of our series, we compared brand-level blue sky multiples and the consistency (and variation) in estimates from Haig Partners and Kerrigan Advisors. But as we noted, the multiple is only half the story. The real engine driving valuation is the earnings base, or the number to which that multiple is applied. And in auto dealership valuations, defining what we call “ongoing earnings” isn’t as simple as referencing last year’s net income. In this installment, we discuss our perspective on how dealership earnings are evaluated, adjusted, and normalized, based on our experience and discussions with dealmakers in the space.
The June 2025 SAAR came in at 15.3 million units, down 1.7% from last month but up 2.3% from June 2024. The noticeable decline in the June 2025 SAAR continues the trend of softer sales after the pull-ahead effect seen in March and April, as consumers likely aimed to beat any tariff-related increases. Mercer Capital expects the July 2025 SAAR to end up near the June 2025 SAAR — above the 15 million mark — but perhaps a bit muted from the trendline we observed at the beginning of 2025. While tariff-related uncertainty persists, it is likely that supply chain, sales volumes, profits, and blue sky multiples will remain under pressure in the coming months.
Auto dealers that sell new vehicles nationwide rely on their Finance and Insurance (“F&I”) departments as an important source of earnings. While top-line revenue from the F&I department is typically a small portion of a new car dealership’s total revenue mix, these departments have much more favorable margins than their counterparts in the selling division. For used dealers without subsidiary captive finance operations, third-party lenders play a larger role in the financing process, and the economics tend to differ from those of their new vehicle-selling counterparts. In this week’s post, we review current themes in auto finance and lay out new developments and changes since last year.
The May 2025 SAAR came in at 15.6 million units, down 9.3% from the previous month and representing a 1.1% decline from May 2024. Since the implementation of the Trump tariffs in early April, existing consumer demand and inventories have temporarily mitigated the impact on the auto industry. However, the resulting supply chain pressures and threat of higher vehicle prices have reduced sales momentum, contributing to a noticeable decline in the SAAR this month. Over the next several months, the automotive industry may continue to experience slower sales and tighter margins as it navigates tariff uncertainty and potentially recalibrates its global supply chains.
