Auto Dealer Valuation Insights

August 18, 2023 Valuation Issues

Driving Value: Key Components of an Auto Dealership Valuation

The value of an auto dealership is shaped by several factors, similar to how certain components make sports games iconic over time. Some of these value drivers, such as franchise affiliation and real estate conditions, can be influenced by the dealer, while others, like economic performance and location, are largely external. Just as sports fans revel in the nostalgic moments of iconic games, auto dealers can enhance their dealership’s value by understanding these drivers, focusing on what’s within their control, and adapting to external market conditions.

August 11, 2023 SAAR

July 2023 SAAR

The July 2023 SAAR shows a consistent year-over-year growth in auto sales volumes for the twelfth consecutive month, reflecting the industry’s journey of recovery since mid-2022. While sales projections remain positive through 2023, the volatility of the auto industry over the last three years and potential economic factors warrant vigilance for the future.

August 4, 2023 Electric Vehicles Special Topics

Toyota’s Steady State Battery

Breakthrough or Yet Another Long-Dated Production Target?

In early July, Financial Times reported Toyota’s solid-state battery breakthrough. According to Keiji Kaita, president of Toyota’s research and development center for carbon neutrality, the goal is to cut the size, weight, and cost of both liquid and solid-state batteries in half. In this post, we get into the details of this report, what auto dealers should know about solid-state batteries, and provide some context for realistic expectations.

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.