The U.S. auto dealership buy/sell market reached an all-time high in 2025
The U.S. auto dealership buy/sell market reached an all-time high in 2025, setting a new benchmark for transaction activity and valuation growth. According to the 2025 Blue Sky Report® released by Kerrigan Advisors, the year recorded 458 completed transactions, representing the sale of 688 franchises. This marks a 5% increase over 2024 and underscores the sustained momentum in dealership consolidation across the country.
Over the past five years, more than 3,500 franchises have changed hands in the United States, reflecting an estimated 15% turnover rate. This pace is nearly double the level seen in the five years leading up to the pandemic, highlighting how significantly the market has accelerated. Strong buyer demand, resilient dealership earnings, and ongoing consolidation trends were the primary drivers behind this record-setting performance. These dynamics also pushed blue sky values—an industry measure of dealership goodwill and intangible value—to elevated levels throughout the year.
However, despite the overall strength, the valuation environment has become increasingly divided. High-performing dealerships continue to command premium valuations, while smaller or underperforming stores face weaker buyer interest. Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors, emphasized that the market is becoming more selective, with leading dealership groups adopting highly targeted acquisition strategies. Buyers are focusing on scaling within existing regions and prioritizing high-volume dealerships that can deliver operational efficiencies.
A notable trend in 2025 was the concentration of transactions within markets where buyers already had a presence. This reflects a broader shift toward geographic consolidation, as dealership groups aim to strengthen regional dominance rather than expand into entirely new territories. As a result, acquisition strategies have become more precise, favoring synergies and localized scale.
The robust buy/sell activity in 2025 was supported by strong dealership financial performance. U.S. retail new vehicle sales reached 14.5 million units, surpassing pre-pandemic levels from 2019. This surge helped drive total industry revenue to a record high. At the same time, public dealership pre-tax earnings stabilized at approximately $4.07 million per store—about 32% higher than pre-pandemic averages. This level of profitability has given buyers confidence that current earnings are sustainable rather than temporary.
New vehicle gross profit per unit averaged $3,383 in 2025, remaining significantly above historical norms at 63% higher than 2019 levels. This was largely supported by disciplined production strategies from automakers and improved inventory management, which helped maintain pricing power. In addition to new vehicle sales, fixed operations—such as service and parts—continued to be a major profit contributor, with gross profits nearing $5 million per dealership. An aging vehicle fleet and increased service demand have reinforced the stability of this revenue stream.
The used vehicle market also showed signs of improvement. Rising lease maturities are expected to increase vehicle supply, supporting higher transaction volumes and strengthening dealership profitability in the coming years. Together, these factors suggest that current earnings represent a new structural baseline for the industry rather than a cyclical peak.
Ryan Kerrigan, Managing Director of Kerrigan Advisors, noted that the industry’s strong earnings continue to fuel buyer demand, sustaining a seller’s market—particularly for top-tier franchises. Many dealerships are still benefiting from improved margins, disciplined inventory levels, and steady growth in fixed operations, all of which contribute to profitability that exceeds historical averages.
At the same time, the market is experiencing a growing imbalance between supply and demand. The most desirable franchises—especially brands like Toyota, Lexus, and leading European luxury marques—are increasingly concentrated among the largest dealership groups. This concentration limits acquisition opportunities and drives up valuations for the few premium assets that remain available.
This dynamic has led to what industry observers describe as a “K-shaped” valuation environment. While demand and pricing for top-performing franchises continue to rise, weaker brands—particularly those with high inventory levels, lower sales volumes, and inconsistent profitability—are seeing declining interest and softer valuations.
Geographically, the Southern United States remained the most active region for buy/sell transactions. Population growth, lower living costs, and business-friendly conditions made the region especially attractive to buyers, resulting in higher transaction volumes and pricing. In terms of franchise mix, domestic brands made a notable comeback in 2025, accounting for 51% of transactions. This rebound was driven by improved sales performance and stronger profit outlooks.
Despite this growth, domestic brands still lag behind import and luxury franchises in terms of buyer preference. Public dealership groups, in particular, showed a strong inclination toward high-volume import and luxury brands. Among their top acquisitions in 2025 were several premium franchises, including those from Mercedes-Benz.
Public dealership groups also increased their overall share of the buy/sell market during the year. They allocated nearly half of their capital—approximately $4.4 billion—toward U.S. dealership acquisitions, marking the second-highest level on record. One of the most significant transactions of the year was Asbury Automotive Group’s acquisition of the Herb Chambers Group, which instantly expanded its footprint in the New England market.
To remain competitive with publicly traded buyers, private dealership groups increasingly turned to external capital sources. Since 2021, the number of Top 150 dealership groups backed by outside investors has grown by 52%. In 2025 alone, about 10% of all acquisitions involved external capital partners. This trend is expected to continue as the cost of acquisitions rises and the industry becomes more technology-driven.
Another emerging factor influencing the buy/sell market is the rapid advancement of artificial intelligence (AI). Some long-standing dealership owners are choosing to exit the business due to the growing complexity and investment required to adapt to AI-driven retail models. Implementing these technologies often involves significant capital expenditures, operational changes, and execution risks.
The disruptive potential of AI is exemplified by Carvana, which has expanded into the new vehicle market, including acquiring multiple franchises from Stellantis. By leveraging an AI-enabled operating model, Carvana has achieved significantly higher revenue per rooftop and lower personnel costs compared to traditional dealerships. This model highlights the potential for technology to reshape the economics of auto retail.
Despite these challenges, well-capitalized dealership groups are embracing technological change as an opportunity. Many are investing in digital transformation and strategic acquisitions to position themselves for long-term growth. Industry leaders believe that this transformation will ultimately lead to a stronger and more efficient auto retail sector, with consolidation continuing into 2026 and beyond.
In response to evolving market conditions, Kerrigan Advisors adjusted several blue sky multiples in the fourth quarter of 2025. In the non-luxury segment, brands such as Honda, Chevrolet, Ford, and Buick GMC saw increased valuation multiples, reflecting stronger earnings expectations and improved buyer demand.
In the luxury segment, BMW, Lexus, and Cadillac also experienced multiple increases. These gains were driven by strong dealership profitability, limited franchise availability, and sustained demand for premium brands.
Overall, the 2025 Blue Sky Report® highlights a market that is both robust and increasingly complex. While transaction volumes and valuations continue to rise, the growing divide between top-performing and underperforming franchises is reshaping the competitive landscape. As consolidation accelerates and technology transforms the industry, dealership groups must adopt more strategic and disciplined approaches to growth.
Source Link:https://www.businesswire.com/
