Auto Dealer Valuation Insights

November 16, 2021 Special Topics

Differing Perspectives on the Used Vehicle Market

Feast or Famine?

Headlines persist describing inventory shortages, record transaction prices, record profitability, and predictions for when conditions will return to normal. How do we make sense of all of it? What factors are contributing to the current conditions? Like the larger automotive industry as a whole, conditions can be described as the best of times and the worst of times, or feast or famine. Interpretation of the conditions can differ depending on the perspective of the consumer or the auto dealer.

In this weeks’ blog, we offer commentary on the status of the used vehicle market and re-examine used vehicle metrics through third quarter data. We also discuss how we got here and where we are headed.

November 8, 2021 SAAR

October 2021 SAAR

October 2021 SAAR was just shy of 13.0 million, as new light vehicle sales saw their first month-to-month gain since April. The October SAAR is up 6.3% from last month but remains 20.8% lower than last October. Auto dealers began the month with record low inventory levels of 972,000 units, and low inventories continue to keep car buying activity constrained.

November 1, 2021 Special Topics Valuation Issues

NADA Is Busy Working on Capitol Hill on Behalf of Auto Dealers

In last week’s blog, we wrote about attending some of the Tennessee Automotive Association meetings and explored the buy/sell considerations discussed there.

This week, we discuss another highlighted topic: the federal legislation that NADA is prioritizing and how that legislation could impact your dealership’s operations.

October 26, 2021 Mergers, Acquisitions, & Divestitures Special Topics

The Tricks and Treats of the Buy/Sell Process from a Selling Dealer’s Perspective

Fall District Meeting Roundup

We recently attended a series of district meetings sponsored by a state auto dealer association. The topic on everyone’s mind was transactions. Because potential transactions seem to be top of mind for so many dealers, this post focuses on that. Because Halloween is right around the corner, we offer guidance about how to think about and structure a transaction in the form of Treats (what is true) as well as Tricks (what is not). We hope you enjoy the post and Happy Halloween!

October 18, 2021 Special Topics

Interpreting Inflation and Interest Rates for Auto Dealers

Can Retail Vehicle Prices Continue to Soar?

Inflation and interest rates are on more people’s minds lately due to supply chain disruptions across all industries. People understand how inflation and interest rates affect their daily lives when noticing the rising cost of goods/services and the cost to borrow money to buy a house, but many don’t realize that inflation and interest rates are interconnected. Inflation and interest rates are frequently linked when discussing macroeconomics and they tend to have an inverse relationship. When interest rates go up, in theory, inflation goes down. However, there are many more factors other than inflation and interest rates impacting the economy in the real world.

In this post, we discuss how we got to our current reality, what auto dealers might expect regarding inflation and interest rates, and how it all might impact the dealership.

October 11, 2021 SAAR

September 2021 SAAR

September 2021 SAAR was 12.2 million, dropping for the fifth consecutive month amidst an ongoing inventory shortage. The September SAAR was the lowest since May 2020’s 12.1 million units but has not fallen near the COVID-19 pandemic low of 8.6 million units in April of 2020. Tight inventories limited both fleet and retail sales in September, which has been the same case over the last four months. Fleet sales continue to fall as a percent of total sales, making up just 12% over the last month as higher profit retail sales continue to be prioritized.

October 5, 2021 Mergers, Acquisitions, & Divestitures Public Auto Dealers Special Topics

September Acquisitions by Sonic, Asbury, and Group 1 and What They Mean for Privately Held Auto Dealerships

Smallest Public Players Getting Larger

In three consecutive weeks, 117 auto dealerships were bought across 3 transactions, each scooping up more dealerships than the last. The three smaller pure-play public auto dealership companies (Group 1 Automotive, Sonic Automotive and Asbury Auto Group) all made sizable acquisitions in a red hot M&A market coming after Lithia purchased a large private auto group back in April.

In this week’s post we discuss how these transactions highlight a couple of key themes in the marketplace for auto dealers.

September 30, 2021 Special Topics Valuation Issues

Tax/Estate Planning Cheat Sheet for Auto Dealers

Winds of Change?

Benjamin Franklin famously said that the only things certain in this life are death and taxes. While both may be certain, taxes are always subject to change.

In this post, we focus on four particular proposals from the Build Back Better Act that impact estate planning and business valuations for auto dealers: 1) Estate Tax / Lifetime Exclusion; 2) Corporate Income Tax Rates; 3) Capital Gains Rates; and 4) Valuation Discounts for Passive Assets.

September 20, 2021 Blue Sky Mergers, Acquisitions, & Divestitures Public Auto Dealers

Public Auto Dealer Profiles: Sonic Automotive

There are six primary publicly traded companies that own approximately 923 new vehicle franchised dealerships as of Q2 2021, or 5.6% of the total number of dealerships in the U.S. (16,623 at year-end 2020 per NADA). In this second installment of our series profiling the six publicly traded companies, we focus on Sonic Automotive.

Our goal with this series is to provide information and insight that can serve as a reference point for private dealers who may be less familiar with the public players, particularly if they don’t operate in the same market. Larger dealers may benefit in benchmarking to public auto dealers.

September 13, 2021 SAAR

August 2021 SAAR

August 2021 SAAR was 13.1 million units, significantly lower than August of 2020 at 15.2 million units and lower than last month’s figure of 14.6 million units. This level of sales is the lowest recorded since June 2020’s 13.0 million during the earlier stages of the COVID-19 pandemic. August’s sales rates reduced the year-to-date SAAR to 16.1 million units from last month’s end total of 16.5 million units.