Regular updates on issues important to the Auto Dealer industry
The U.S. auto industry closed 2025 with modest sequential improvement, surpassing 16 million units for the first time since 2019. While volumes stabilized late in the year, continued year-over-year declines, rising incentives, and uneven inventory levels across brands highlight a market that is normalizing rather than accelerating. As the industry moves into 2026, disciplined inventory management and margin preservation will be critical drivers of dealer performance and franchise value.
Mercer Capital Vice President David Harkins was recently featured on the podcast Beyond the Lot: Understanding Dealership Valuations, hosted by Kevin Timson, for a wide-ranging conversation on the factors that truly drive value in automotive dealerships. Drawing from his experience advising auto dealers nationwide, David discusses how elements such as brand strength, real estate, fixed operations, and local market dynamics influence dealership valuations.
November brought a modest sales rebound for the auto industry, though year-over-year volumes continued to slip as tariff-driven price increases and expired EV tax credits cooled demand. BEV market share has dropped sharply since September, and per-unit profitability is tightening even as the industry remains on track to top 16 million units for the first time since 2019. With wide differences in brand-level inventory, franchise value is increasingly tied to OEM supply discipline as dealers head into a mixed finish for 2025.
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.
