Category

Auto Dealer Valuation Insights

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October 27, 2023 Valuation Issues

Dealership Working Capital

A Cautionary Tale Against Rigid Comparisons

Understanding the intricacies of business valuation, particularly for auto dealerships, involves a comprehensive examination of balance sheets, income statements, and normalization adjustments. We explore the significance of tangible and non-operating assets, the nuances of working capital, and the critical nature of management insights in assessing a dealership’s true value. A case study highlights the multifaceted approach required, underscoring the importance of expert analysis in navigating the complex terrain of financial assessments and valuations.

October 20, 2023 Public Auto Dealers Special Topics Valuation Issues

Just Released: Mid-Year 2023 Auto Dealer Industry Newsletter

We are pleased to release our latest edition of Value Focus: Auto Dealer Industry Newsletter.

October 12, 2023 SAAR

September 2023 SAAR

The automotive industry has witnessed its fourteenth consecutive month of annual improvements in the Seasonally Adjusted Annual Rate (SAAR), with September 2023 recording a SAAR of 15.7 million units—a 14.9% increase compared to the previous year. However, we anticipate a potential end to the double-digit year-over-year improvements streak in the coming month. With challenges like the United Auto Workers strike and changing supply chain conditions, it remains critical to monitor consumer activity and sales trends, especially given the decline in transaction prices and surge in incentives.

October 6, 2023 Electric Vehicles Special Topics Supply Chain

United Auto Workers Strike

What It Means for Auto Dealers

The United Auto Workers (UAW) strike has been ongoing for almost a month now. In this post, we talk about how we got here, updates on the strike, and the strike’s anticipated impact on auto dealers.

September 29, 2023 Blue Sky Special Topics

The Winding Road to Blue Sky Value

Important Considerations in Auto Dealer Valuations and Pitfalls to Avoid

In the upcoming month, Scott Womack and David Harkins will present at three different forums, shedding light on the pivotal aspects and considerations of auto dealer valuations, including special considerations in litigation/buy-sell matters. They will delve into why traditional market approaches are generally not applicable for the valuation of auto dealerships, especially single rooftop operations, and explore the limitations of existing database evaluations. Beyond this, they will also explore the changing dynamics of value drivers like real estate and employee management, highlighting the shifting landscape as the industry moves towards digital and online platforms, and offer insights and suggestions for navigating buy/sell litigation and ensuring fair and consistent transactions.

September 13, 2023 Valuation Issues

Do You Know How Much Your Dealership Is Worth?

Whitepaper: Understand the Value of Your Auto Dealership

If you’ve never had your auto dealership valued, chances are that one day you will. The circumstances giving rise to this valuation might be voluntary (such as a planned buyout of a retiring partner) or involuntary (such as a death, divorce, or partner dispute). When events like these occur, the topic of your auto dealership’s valuation can quickly shift from an afterthought to something of great consequence.

September 8, 2023 SAAR

August 2023 SAAR

The automotive industry in August 2023 saw a 13.6% year-over-year growth in SAAR (Seasonally Adjusted Annual Rate), marking the thirteenth consecutive month of such improvements. However, this growth is gradually tapering off, suggesting that the industry’s recovery is becoming more nuanced.

August 25, 2023 Public Auto Dealers Supply Chain Used Vehicles

Q2 2023 Earnings Calls

Lower New Vehicle Supply Boost Fails to Lift Profits; Used Vehicle Prices Drop Amid High Demand

The automotive market is experiencing a shift as improved new vehicle availability is affecting used vehicle prices and profitability. Insights from industry leaders like Lithia, AutoNation, and Asbury indicate important trends, from stock incentives for General Managers to the implications of electric vehicle maintenance on dealerships. This piece explores these dynamics, touching on the potential for pent-up demand and the future of dealership sizing in a post-COVID landscape.

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.

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.

April 27, 2023 Special Topics Valuation Issues

Middle Men: Family-Owned Auto Dealerships

As an auto dealer, you may be wondering what is my dealership worth? In this video, Scott Womack discusses the key value drivers of an auto dealership.

April 21, 2023 Electric Vehicles Special Topics

EV Potpourri

Discussing Levels of Charging to OEM Requirements of Dealers

There are exciting developments in the electric vehicle (EV) market, where sales momentum continues to build as EVs make up an increasing share of new light-duty vehicle sales. Learn about the different charging levels, the various requirements automakers have for their dealers, and the expanding presence of charging stations at various retailers and restaurants. As major auto manufacturers are investing in and adapting to the EV revolution, sustainable transportation appears to be the way forward in this rapidly growing industry.

April 12, 2023 SAAR

March 2023 SAAR

Is North American Auto Production Lagging Behind?

The March SAAR was 14.8 million units, down 1.2% from last month but up 9.3% compared to March 2022. Year-over-year improvements in the SAAR continue to persist as inventory is more available compared to this time last year. In fact, this month marks the eighth month in a row of year-over-year improvements in the SAAR and signals consistency in auto production and auto demand trends.