Auto Dealer Valuation Insights

July 27, 2023 Special Topics

Mid-Year 2023 Review of the Auto Dealer Industry by Metrics

Cooling Statistics, But Perspective Is Key

The first half of 2023 has been successful for auto dealers despite a decline in some metrics from previous record highs, according to recent industry reports. Although new vehicle profitability has experienced a reduction compared to the end of 2021, it’s still notably higher than pre-pandemic levels. In this blog, we provide a deep dive into key indicators such as new vehicle supply, average trade-in equity values of used vehicles, and vehicle miles traveled to give a comprehensive view of the current auto industry trends.

July 17, 2023 Special Topics Valuation Issues

Tax Planning for Auto Dealerships

Why Auto Dealers Might Not Pay “Market” Rent

In business valuation, appraisers seek to normalize historical earnings to establish the level of earnings an investor might reasonably expect from an investment in the subject company. These adjustments may increase or decrease earnings, and they can be for a variety of reasons. Normalization adjustments include surveying various expense categories and determining whether the amount historically paid is considered “market rate.”

Rent paid to a related party is frequently judged to be above or below market, which can be for a variety of reasons. Dealers’ priorities lie more with sales and operating efficiency than tracking what the market says they should pay in rent. The rent paid also may be artificially high or low for tax purposes. In this post, we examine what exactly this means, and why auto dealers may hold real estate in a separate but related entity from the one that owns the dealership operations.

July 11, 2023 SAAR

June 2023 SAAR

Direct-to-Consumer Sales—Gaining Traction or Losing Their Footing?

A fundamental shift is underway in the industry, with manufacturers like Mercedes-Benz and Volkswagen moving towards a direct-to-consumer sales model, inciting mixed reactions from auto dealers and legal scrutiny in various states. Meanwhile, July 2023’s SAAR outlook remains positive despite looming recession concerns and the potential impact on consumer behavior.

June 22, 2023 Special Topics

Overview of Auto Finance 2023

Origination, Delinquency, and Portfolio Trends

Explore the shifting landscape of auto finance as we compare the roles of captive finance companies and third-party lenders, track current market trends, and analyze credit quality and interest rates. From assessing the changing face of dealership profitability to exploring the increasing importance of finance and insurance departments, we offer our perspective on the industry’s present and potential future.

June 19, 2023 Special Topics

Demise of the Sedan

Does Recent Data Suggest the Sedan Will Follow the Station Wagon and Minivan?

Do you remember the infamous car from National Lampoon’s Vacation? As the inspiration for this week’s blog, we explore how cars have evolved from the ‘family truckster’ station wagons of the 70s and 80s to the rise of SUVs and crossovers today. Leveraging recent data and vehicle trends, we look at whether the once-popular sedan is being phased out or if it could potentially make a comeback. We also consider the influence of historical legislation on vehicle trends and potential future shifts that may once again place the sedan in the limelight.

June 9, 2023 SAAR

May 2023 SAAR

The Road Ahead: SAAR Predictions for the Rest of 2023

The May SAAR saw a steady rise in national auto sales as the industry heads towards pre-pandemic levels and assesses key considerations for the second half of 2023. In this week’s post, we explore the balance of supply and demand, how inventory shortages and pent-up demand influence the market, and what may lie ahead in light of potential economic changes.

June 1, 2023 Valuation Issues

6 Events That Warrant a Business Valuation of an Auto Dealership

Understanding the value of an auto dealership is crucial during significant life events, strategic planning, or potential sale. This piece offers a comprehensive look at various scenarios that might necessitate a business valuation, such as estate planning, death of a dealer principal, and buy/sell agreements. Get to know how regular valuations can help track your dealership’s value over time, enhancing strategic decisions, and preparing for potential offers or disputes.

May 19, 2023 Blue Sky Mergers, Acquisitions, & Divestitures Valuation Issues

What Is the Value of My Auto Dealership?

It Depends on Who's Buying

Wondering what your auto dealership is worth? This post gives practical illustrations of how buyers might determine the premiums or discounts they are willing to pay for your dealership. Discover the unique facets that shape the value of your auto dealership through the lens of three distinct buyer types: strategic, financial, and minority interest. Understand the dynamics influencing your dealership’s value and arm yourself with knowledge for future negotiations.

May 12, 2023 Special Topics

Infrastructure Investment for EVs, Data Privacy, and Dealership Buy-Back Programs

2023 NADC Conference Update

The recent NADC conference unveiled many developments that are shaking up the auto dealer industry. Unpacking the evolving shift towards electric vehicles (EVs), we heard about infrastructure investments and the legal labyrinth posed by new EV-specific brands. As technology in vehicles leaps forward, we also learned the challenges of data privacy and consumer data protection laws. And for those dealers hesitant about the EV transition, dealership buyback programs may be on the table. These issues, among others, are steering the future course of the auto industry, demanding a watchful eye. Discover how these evolving landscapes could impact you.

May 5, 2023 SAAR

April 2023 SAAR

The April 2023 SAAR reveals a significant upswing in vehicle sales, with an 11.4% increase from April 2022. This marks the ninth consecutive month of year-over-year growth, emphasizing the improvement in vehicle availability. As we compare the inventory to sales ratio over the past three years, it’s clear that the industry has recovered from the pandemic’s impact on demand and supply chain shortages. Transaction prices are currently experiencing a slight normalization, while incentive spending is on the rise. With supply chain conditions gradually improving, the outlook for May 2023 remains optimistic. Read the full analysis to discover what this might mean for the automotive industry and potential buyers.