Auto Dealer Valuation Insights

August 30, 2021 Mergers, Acquisitions, & Divestitures Special Topics

M&A, Reinvesting in Core Operations, or Paying Dividends

How Public and Private Dealerships Should Think About Allocating Capital Amidst Excess Liquidity

Over the past year or so, many auto dealers “outperformed” particularly as inventory shortages have raised margins on new and used vehicles in 2021. Additionally, cost cutting initiatives have dealerships running more efficiently, leading to record profitability. The question now comes for public and private auto dealerships alike: what do I do with this excess liquidity?

In this post, we consider what options are available to both public and private dealers. We look at what decisions the publics are making, and what that could mean for private dealers.

August 23, 2021 Mergers, Acquisitions, & Divestitures Public Auto Dealers Valuation Issues

Q2 2021 Earnings Calls

Public Auto Dealers Weigh Record Profits, Days’ Supply, and Capital Allocation

Second quarter earnings calls across the group of public auto dealers began with similar themes: record profits and earnings, record Gross Profits Per Unit (GPU) on new and used vehicles, and tightening inventory conditions. This week we take a deeper dive into some of those themes including remarks from management, related to expectations moving forward.

August 16, 2021 Current Events Public Auto Dealers Special Topics

Used Vehicle Margins in 2021

How Large Used-Only Auto Retailers Are Measuring Up

As our dealer clients know, automotive retailing competition has intensified with large, well-capitalized online-only retailers getting plenty of attention. Due to imbalances between supply and demand, gross margins on both new and used vehicles have increased in 2021.

In this post, we survey gross margins for the publicly traded dealerships, in light of the current operating environment and reconsider the investment thesis put forth by the new entrants.

August 9, 2021 SAAR Special Topics

July 2021 SAAR

The July 2021 SAAR was 14.8 million units, roughly flat compared to July 2020, but down 12% from July 2019.  SAAR was expected to fall for the third straight month, but this figure is lower than many experts predicted in June. In this week’s post, we dig into the numbers.

August 2, 2021 Special Topics Valuation Issues

First Half 2021 Review of the Auto Dealer Industry

What Are Key Statistics Saying?

As we enter into the second half of 2021, first half statistics are being released and second quarter earnings calls are on the horizon for the public auto companies.  We’ve all read the headlines of the auto dealer industry in 2021:  heightened profitability, historic gross profits per unit and soaring retail sales prices for new and used vehicles, and inventory shortages and challenges caused by plant shutdowns and the microchip shortage. What are some of the key industry statistics saying about the current and future health of the auto dealer industry? Have they peaked, are they continuing to increase or beginning to decline, and/or how long will the current conditions hold? In this post we attempt to answer these questions.

July 26, 2021 Blue Sky Litigation Valuation Issues

Formula Clauses for Auto Dealerships

Pros and Cons of Using Formula Clauses in Buy-Sell Agreements

A formula clause explains how a business will be valued, usually as part of a buy-sell agreement, employment agreement, transfer of interests under certain circumstances, or other agreement entered between owners of a company. In this post, we explain formula clauses, when they are used, why they are used, and why we ultimately recommend they not be used.

July 19, 2021 SAAR Special Topics

June 2021 SAAR

The June 2021 SAAR totaled 15.4 million units, which is up 12.4% compared to June 2020 (the lowest June figure in recent memory due to the COVID-19 pandemic) but down 9.9% from May 2021.  In this post, we discuss the June SAAR number, the ongoing microchip shortage, the hot market for used cars, and what all this means to dealers.

July 12, 2021 Luxury Special Topics

The Electric Vehicle Race

Tesla vs. Everyone

When you think “electric vehicles”, there has been one brand that has established itself as a clear leader: Tesla. In this post, we take a look at Tesla and recent competitors that are challenging Tesla in the EV space.

June 29, 2021 Special Topics

Industry Trends From the Road

Key Takeaways from State Automotive Annual Conventions

We recently attended the annual conventions of two state automotive groups – Kentucky and the Tri-State Convention consisting of Tennessee, Alabama, and Mississippi. In this post, we summarize certain sessions that our readers should find interesting including cybersecurity issues, how to protect your dealership from fraud, future trends and their possible impact, coming regulation and what that means for your dealership, and the importance of succession planning.

June 23, 2021 Valuation Issues

Whitepaper: Understand the Value of Your Auto Dealership

In this whitepaper, we break down the value drivers of a dealership, discuss when you might need a formal valuation, introduce the valuation methodologies used by professional business appraisers, and go into some depth about topics such as dealer financial statements and normalizing adjustments to the balance sheet and income statement.