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Dealership buyers have become more selective as the retail market turns.

It’s Still a Seller’s Market for Franchised Dealers

The market remains strong overall, but demand and prices have dipped due to a downturn in profits for automobile retailers.

It’s still a high-volume, high-price, sellers’ market for franchised, new-vehicle dealerships, brokers say — just not quite as big and not quite as pricey as the recent past, on average, since dealership profits fell from recent record highs.

“It’s very much a sellers’ market,” Alan Haig, president of Haig Partners, Fort Lauderdale, FL, tells Wards. “There’s still a lot of demand for stores.”

George Karolis, president of the Presidio Group, says buyers are being “a little” more selective.

“Nothing lasts forever,” Karolis tells Wards. “But we do say it’s definitely a sellers’ market.” The Presidio Group has offices in San Francisco and Duluth, GA.

Erin Kerrigan, founder and managing director of Kerrigan Advisors, Irvine, CA., also says buyers today are relatively more selective. Still, she says they are just as keen to purchase the most desirable franchises.

“It’s certainly a sellers’ market for the top franchises,” she tells Wards. "And it’s a sellers’ market for high-growth markets, like Florida or Texas. If you’re the top-volume store in one of these markets, as well.”

Not as much in demand are weaker franchises in  low-growth markets, Kerrigan says. “I do see some pricing pressure there. There is no pricing pressure on the high-volume dealership. The market’s bifurcating a bit,” she says.

Meanwhile, on second-quarter transactions, the latest Haig Report estimates 143 rooftops changed hands in the second quarter, up 13% vs. a year ago. The report says for all of 2023, buy-sell activity is on a pace to trade more than 500 dealerships.

An estimated 634 dealerships changed hands in 2022, down from a high of 707 in 2021, the report says. While buy-sell volume is down from record highs, it’s still high by recent standards. The Haig Report says that in the four years before 2020, buy-sells averaged fewer than 350 dealerships.

Dealership profits are down a bit from once-in-a-lifetime highs, as new-vehicle inventory has climbed this year. However, automakers insist they have broken the habit of building too much inventory, which then must be heavily discounted.

“In the past, dealerships were making about one-third as much as they do now,” Haig says. “I don’t think anybody knows where profits will level off, but they will end up higher than before the pandemic — if nothing else, than because of inflation. Earnings are higher, the price of vehicles is higher.”




TAGS: Retail
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