Auto Dealer Valuation Insights

February 23, 2023 Valuation Issues

LOV(E): Why Getting the Level of Value Right Is So Important to Auto Dealers

Part II

In this two-part series, we continue our exploration of the “Levels of Value.” The Levels of Value refer to the idea that while “price” and “value” may be synonymous, they don’t quite mean the same thing. A nonmarketable minority interest level of value is very different from a strategic control interest level of value. Last week we described each Level of Value and why the concept is so important to auto dealers.

This week, we discuss four potential transactions in which selecting the appropriate level of value is critical and explain why: 1) estate planning, 2) corporate development, 3) divestitures, and 4) shareholder redemptions.

February 16, 2023 Valuation Issues

LOV(E): What Are the “Levels of Value” and Why Does It Matter to Auto Dealers?

Part I

In the spirit of Valentine’s Day, we cover a topic that may seem too theoretical; however, the shareholders in your business must understand it – LOV – or the “Levels of Value.” The Levels of Value refers to the idea that while “price” and “value” may be synonymous, they don’t quite mean the same thing. A nonmarketable minority interest level of value is very different from a strategic control interest level of value. In this week’s post, we explain what each level means and how each specifically relates to auto dealers. This will be the first part of a two-part blog series.

February 9, 2023 SAAR

January 2023 SAAR

The January 2022 SAAR was 15.7 million units, which is 18% higher than December 2022 and 4% higher than this time last year. This month’s data release revealed the fifth straight month of year-over-year improvements in the SAAR, supporting that inventory levels are actually recovering from the throws of persistent supply chain disruptions.

February 3, 2023 Supply Chain

Floorplan Interest Income Fading

Part 2: Floorplan Relevant Factors

In part 2 of our series on floorplan interest, we take a closer look at floorplan relevant factors and macroeconomic forces to keep an eye on throughout the coming year and beyond as dealers plan their floorplan expenditures and budgeting.

January 27, 2023 Special Topics Supply Chain

Floorplan Interest Income Fading

Part 1: Rising Interest Rates and Increasing Inventories Are Anticipated to Remove the Unlikely Profit Center

Compared to last year, interest rates have significantly increased since the Federal Reserve began raising rates in March 2022. Inventories have also improved as the industry works through its supply chain issues. These shifts in economic trends are expected to have an impact on many aspects of auto dealer operations. In this week’s post, we talk about floorplan interest income and pose some important questions: What is floorplan interest expense, and what are floorplan credits? How have floorplan credits turned into an unlikely profit center for dealers? Can we expect this trend to continue amid changing conditions?

January 20, 2023 Electric Vehicles SAAR Special Topics Used Vehicles

Auto Industry Trends to Monitor in 2023

An Automotive Potpourri

January is a month to review statistics from the prior year and to make predictions for the new year. The automobile industry is no different. In this post, we tackle a potpourri of trends to monitor in 2023, including new and used vehicle prices, electric vehicles, connected cars, and SAAR predictions for 2023.      

January 13, 2023 Blue Sky Valuation Issues

Six Things to Consider When Working with a Business Appraiser

We’ve turned the page on 2022, another year defined by challenges, record profitability and elevated valuations for auto dealers.  As we enter 2023, there will likely be unique challenges and opportunities for auto dealers regarding business valuations. We will dedicate future posts to the discussion of these opportunities from the perspective of succession planning in an environment with sunsetting tax exemptions and depressed asset values, especially if interest rates continue to rise and profitability subsides in 2023.

We previously discussed six events that could trigger the need for a business valuation. In this week’s post, we discuss six things that attorneys and auto dealers should consider when selecting or working with a business appraiser.

January 6, 2023 SAAR

December 2022 SAAR

The December SAAR was 13.3 million units, down 5.3% from last month but up 4.7% from this time last year. This month’s SAAR data is a bit concerning for the auto industry, as supply chain improvements do not seem to be translating to improvements in the sales pace of vehicles as quickly as the last couple months have indicated. Over the past month, it has seemed more and more likely that plummeting trade-in equity, persistently high interest rates and growing fears of an economic recession are keeping the sale of automobiles low, which could spell trouble for auto dealers that have thrived in a high price environment over the past eighteen months.

December 19, 2022 Special Topics

‘Twas the Blog Before Christmas…

2022 Mercer Capital Auto Dealer Holiday Poem

It has become a tradition for the Auto Dealer team at Mercer Capital to end the blog year with a “unique” summary of industry events, riffing off Clement Clark Moore’s classic “A Visit from St. Nicholas.” We hope all of you enjoy the holiday season. We look forward to hearing from you in 2023.

December 12, 2022 SAAR

November 2022 SAAR

The November 2022 SAAR was 14.1 million units, down 6.5% from last month but up 7.9% from November 2021. Compared to this time last year, vehicle availability has significantly improved, and there seems to be hope around the industry that the auto inventory crunch is in its final act. If true, this would be good news for auto dealers and consumers alike, as more units on dealer lots seem to be the first step in a “return to normal” for the industry. While it’s clear that a year-over-year improvement is present, a dip from last month’s SAAR figure may raise red flags for some of our readers. However, an additional selling weekend in October and a marginal uptick in sales due to natural disasters in the Gulf of Mexico were both tailwinds that supported a surprising improvement in the SAAR last month. Given this perspective, November 2022’s SAAR seems to return to the larger trend of improving conditions.