Auto Dealers Optimistic About 2025 Valuations Despite Profit Normalization
The Auto Dealers heading into 2025 remains positive, as dealership valuations are expected to stay strong even as profits stabilize. This optimistic perspective emerges from the newly released 2024 Kerrigan Dealer Survey, which polled more than 635 auto dealers to understand their perspectives on future business valuations, franchise performance, and acquisition trends.
The survey reveals that over half (51%) of Auto Dealers believe that dealership valuations will remain at elevated levels throughout 2025, with 17% expecting further growth in valuations. The stabilization of pre-tax earnings plays a key role in this positive sentiment, as 43% of dealers regard their current earnings as a solid predictor of future success. This indicates a degree of confidence in the market despite the normalization of dealership profits in 2024. As the industry moves forward, it appears that many dealers are finding a stable foundation in their current financial performance, which bolsters their optimistic outlook on future valuations.
However, the survey also highlights a growing sense of concern among some Auto Dealers regarding future profits. Forty-three percent of dealers surveyed have a more pessimistic outlook on profitability than in 2024, Auto Dealers with the advent of electric vehicle (EV) sales being a significant contributing factor. A striking 77% of dealers anticipate that EV sales will negatively impact their profits in 2025. In contrast, traditional hybrid vehicle sales and parts and service operations are viewed more favorably. A majority ofAuto Dealers(77%) expect hybrid vehicle sales to positively affect profits, while 75% believe that parts and service will be a strong revenue stream in 2025.
Additionally, nearly half of the surveyed dealers (47%) are concerned that investments in Original Equipment Manufacturer (OEM) facilities will hurt their profits in the near future. Despite these challenges, sentiment around dealership valuations remains largely positive, with dealers clearly indicating that the long-term outlook for valuations remains strong.
Erin Kerrigan, Auto Dealers the founder and managing director of Kerrigan Advisors, commented on the continued optimism, stating that while there is a moderation in dealership profits, the overall sentiment towards valuations in 2025 remains positive. She emphasized that this sentiment is likely to influence the acquisition market in the coming year.
Auto Dealers Kerrigan also noted that compared to previous years, a growing number of dealers are expecting an increase in buy/sell activity, with many anticipating the addition of new dealerships to their portfolios. Auto Dealers This shift aligns with the broader industry trend where dealerships are increasingly focused on Auto Dealers scaling up to adapt to the evolving auto retail landscape. Auto Dealers The consolidation of dealerships is a prominent theme, prompting businesses to either expand or consider selling.
The survey also offers insights into dealers’ plans for expansion in 2025. Forty-nine percent of dealerships expect to acquire one or more dealerships, a slight increase from the 47% reported in 2024. Conversely, 44% of dealers expect no changes in the number of dealerships they plan to buy or sell, which is down from 47% in 2024. Interestingly, the number of dealers who anticipate selling a dealership has seen a slight uptick, rising from 6% to 7%. This increase could be attributed to a more cautious approach from dealers who are less optimistic about future profits and valuations.
Shifting Franchise Valuations
Franchise valuations also reveal some noteworthy trends. While many dealerships expect their franchise values to either remain stable or increase, certain franchises are experiencing a marked decline in dealer expectations. This decline is often attributed to an oversupply of new vehicle inventory and a significant drop in profitability within some franchise categories.
According to the survey, Lexus, Toyota, Honda, Kia, and Subaru are expected to experience the highest gains in valuation over the next year, with over 30% of dealers anticipating increased values for these brands. Notably, Lexus has taken the lead in valuation expectations for the first time, and Honda has made a return to the top five list after a one-year absence. Kia, which had led the franchise valuation expectations in 2023, experienced an 11-percentage point drop in dealer expectations, reflecting a shift in dealer sentiment. Hyundai, which had ranked second in valuation expectations last year, did not make the top five in 2024.
Conversely, brands such as CDJR (Chrysler, Dodge, Jeep, and Ram), Infiniti, Lincoln, and Nissan are expected to see declines in value, with over 64% of dealers predicting negative trends for these brands. CDJR and Nissan, in particular, saw a significant increase in the percentage of dealers anticipating a decline in value, with an alarming 20-percentage point jump in dealer pessimism.
The Most and Least Trusted Franchises
The survey also delves into the trust levels that dealers have in various franchises. Toyota continues to rank as the most trusted franchise by a wide margin, with 83% of dealers reporting a high level of trust in the brand. This marks nearly 3.5 times the average trust level of 24% across all franchises. Lexus, Toyota’s luxury counterpart, also performs strongly, securing the second-highest level of trust among dealers.
On the other end of the spectrum, CDJR, Infiniti, Lincoln, and Nissan are regarded with the least trust by dealers. A striking 72% of dealers reported having no trust in CDJR, which is consistent with the expectation of a decline in its value. Similarly, 58% of dealers expressed low trust in Nissan, with Infiniti and Lincoln also falling into the low-trust category. This trend marks a significant shift in dealer sentiment, with some brands seeing their trust levels dip to record lows.
For the first time in the survey’s history, Kerrigan Advisors also measured which franchises dealers are most likely to seek out in 2025. As expected, Toyota and Lexus emerged as the most requested brands, reflecting their strong market position and dealer loyalty. Ryan Kerrigan, managing director of Kerrigan Advisors, noted that Toyota and Lexus are highly sought after due to their measured approach to network size, EV strategies, and inventory management. These factors have made these franchises particularly attractive to dealers seeking to invest in brands they trust.
Franchise-Specific Changes and Insights
There were several notable changes in franchise valuations and dealer trust levels from the 2024 Kerrigan Dealer Survey. Honda made a strong showing, ranking second among dealers looking to add a franchise in 2025. Nearly one-third of dealers identified Honda as a key target for expansion, while also recognizing it as the most improved brand in 2024 for valuation increases, with a 14-percentage point jump.
Ford, which ranked as the least trusted franchise in 2023, experienced a marked improvement in 2024, with an 11-percentage point increase in dealer trust. It now ranks as the fifth least trusted franchise, showing a slight recovery in dealer sentiment.
On the other hand, CDJR has emerged as the franchise most likely to experience a decline in value in 2024, with a staggering 76% of dealers predicting a drop in valuation. Nissan, which was also among the least trusted franchises, remains the second least sought-after non-luxury franchise among buyers.
The 2024 survey also marks a significant decline in Hyundai’s outlook, with 28% of dealers expecting a decrease in Hyundai’s franchise value in 2025—a notable jump from the previous year.
Methodology
The data for the 2024 Kerrigan Dealer Survey was collected through Kerrigan Advisors’ annual survey in conjunction with The Blue Sky Report. The survey gathered responses from over 635 franchised auto dealers in Kerrigan Advisors’ proprietary database. The survey ran from June to November 2024.
For a deeper dive into the full results of the survey and to access additional resources like The Blue Sky Report, dealers and interested parties can visit the Kerrigan Advisors website.
