Survey: Car Retailers Expect Dealership Values to Rise

Going into 2021 and despite the pandemic, a greater share of auto dealers expect the value of their franchises to increase in the next 12 months, according to a dealer survey from Kerrigan Advisors.

In addition, dealers responding to the survey and dealership brokers in interviews say they expect heavy traffic in buy-sell agreements in the coming year, after a high-volume year in 2020, as well.

“The results of the survey found that dealers remain largely optimistic about the valuation of their dealerships over the next 12 months, despite the economic turmoil associated with COVID-19,” according to the 2020 Kerrigan Dealer Survey report, published Nov. 24.

The survey found 33% of 680 dealer respondents expect the value of their dealerships to increase, up from 26% a year ago.

Another 53% of respondents say they expect their dealerships to remain the same in value, vs. 60% a year ago. And 14% say they expect a decrease in valuation, the same as last year.

Erin Kerrigan, founder and managing director of Kerrigan Advisors in Irvine, CA, says the leading brands dealers expect to gain value in the next 12 months are Subaru, Toyota, Porsche, Honda and Mercedes-Benz. Those survey results range from 38% of all respondents who name Subaru, to 26% who name Mercedes-Benz.

All respondents chose from among all brands, not just a brand’s own dealers, Kerrigan says.

At the other end of the survey, the five brands dealers most commonly expect to lose value in the next 12 months are Nissan, Infiniti, Acura, Cadillac and Buick-GMC.

Those range from 69% of respondents for Nissan, to 40% for Buick-GMC, the survey says.

In an earlier phone interview, Kerrigan says the buy-sell market for dealerships is “as active as I’ve ever seen it. Buyers are getting very aggressive in their growth plans. I think it’s because we are making so much money, especially existing dealers.”

Separately, a couple of her competitors express similar opinions. Alan Haig, president of Haig Partners in Fort Lauderdale, FL, points out in a phone interview that Lithia Motors alone announced plans in July 2020 to add $20 billion-plus in revenues from mergers and acquisitions in the next five years.

Meanwhile George Karolis, president of the Presidio Group in Duluth, GA, says in a phone interview the pace of mergers and acquisitions has not let up in 2020. “If anything, I think that the pace has accelerated. Dealers are doing real well,” he says. “Margins are back to pre-COVID levels, but expenses are not.”