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.
Regular updates on issues important to the Auto Dealer industry
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.
On a recent client engagement, I was asked the question, “Why are Haig and Kerrigan’s multiples so far apart?”
I’ve never really viewed them that way, as the blue sky multiples published in their quarterly newsletters tend to cluster reasonably close together. While their multiples are usually within 1x of each other, this difference can be more pronounced on the lower end of the range as the decline in value from a 4x multiple to a 3x multiple is 25%.
In this week’s post, we reached out to our friends at the premier auto dealer investment banks to hear what they had to say.
The April 2025 SAAR came in at 17.3 million units, down 3.1% from last month but up 7.8% from April 2024. Even with a slight month-over-month decline from the short-term peak of last month’s SAAR, April 2025 still saw the second-highest SAAR since April 2021. This highlights the strong demand in the current market as consumers are motivated to purchase a vehicle before potential tariff-related price increases. Mercer Capital expects the May 2025 SAAR to come in lower, as we believe demand was pulled into March and April with dealers across the country advertising some form of “pre-tariff pricing.” We’ll be keeping tabs on the market to keep you up to date on tariffs and other industry-relevant news.
After the initial uncertainty brought on by the COVID-19 pandemic, auto dealerships have experienced record performance. However, profits have receded towards more normalized levels just as a significant cliff for estate tax planning looms at the end of 2025. It’s time for auto dealers to revisit their estate planning.
The United States automotive industry has been navigating an increasingly uncertain landscape since the 2024 presidential election. Since taking office, the current administration announced a series of tariffs that introduced uncertainty for both manufacturers and dealers. If the newly imposed tariffs remain in effect, dealerships across the United States could face near- and long-term headwinds. In this week’s post, we cover how these changes may affect sales volumes, profitability, and auto dealer valuations.
