The auto dealership buy/sell market experienced an unprecedented year in 2024
The auto dealership buy/sell market experienced an unprecedented year in 2024, setting a new record with 438 completed transactions, representing a 10% increase from 2023, as detailed in the 2024 Annual Blue Sky Report® by Kerrigan Advisors. A total of 697 franchises changed hands, marking the highest number since 2021 and reflecting a 2.5% increase from the prior year. This surge in activity was largely driven by heightened confidence in the auto retail sector’s profitability and future potential, spurred by favorable economic conditions and evolving market dynamics.
According to the report, the fourth-quarter automotive sales remained resilient, positioning the industry to potentially surpass the record annual vehicle sales peak of 17.55 million units set in 2016, provided that trade policies remain supportive. With more than a quarter of a trillion dollars in accumulated pre-tax dealership earnings since the pandemic, Kerrigan Advisors projects continued consolidation trends extending into 2025, as larger dealership groups seek to expand their market share and capitalize on industry growth.
Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors, emphasized that declining interest rates, moderating inflation, and improved vehicle affordability contributed to an uptick in new vehicle sales, bolstering buyer confidence. Post-election economic stability further reinforced this optimism, with a sharp rebound in new vehicle sales driven by pent-up consumer demand following years of supply constraints and inventory shortages. Many dealers perceive 2024’s lower earnings as a market trough, anticipating future growth and stabilization in profitability.
Despite inflationary adjustments, dealership earnings remain significantly elevated, standing at 78% above pre-pandemic levels. If gross profit per new vehicle stabilizes at 2024 levels and sales volumes return to historical norms, industry earnings could normalize well above pre-pandemic figures, generating over $40 billion in gross profit, as projected by The Blue Sky Report®. This promising outlook is fueling strong buyer motivation and driving up blue sky valuations, making dealership acquisitions a compelling investment opportunity.
Franchise Performance and Market Segmentation
Franchise diversification played a critical role in 2024, as the auto retail market split into two distinct categories: “have” and “have not” franchises. Strong franchises, including Lexus, Toyota, BMW, and Honda, continued to benefit from low vehicle inventories and high gross profit margins, positioning them as highly desirable assets in the buy/sell market. Meanwhile, struggling franchises such as Lincoln, Nissan, and CDJR faced rising inventory levels, increased floorplan costs, and declining gross profits, leading to significant challenges in maintaining valuation stability.
This divergence in performance was reflected in valuation trends, with high-performing franchises maintaining strong demand and premium pricing, while weaker brands experienced declining confidence and reduced valuations. As dealer sentiment toward underperforming OEMs waned, valuations for struggling franchises dropped sharply, leading to financial distress for some dealers for the first time since the Great Recession. The impact of weak franchises became particularly evident as the average dealer owns fewer than three stores, limiting their ability to absorb financial losses.
As a result, 2024 witnessed a surge in franchise divestitures, particularly among underperforming brands such as CDJR, Nissan, and Infiniti. Multi-dealership transactions declined from 32% in 2023 to just 22% of 2024’s transactions—the lowest share on record—while single-point transactions increased, reducing the number of franchises sold per deal by 7%.
Market Consolidation, Regional Shifts, and Blue Sky Valuations
The trend of market consolidation continued to gain momentum in 2024, with the largest private dealership groups expanding at an accelerated pace while U.S. public dealer groups remained net sellers. The Top 150 Dealership Groups accounted for 30% of industry revenue, representing 28% of acquired franchises—a record high. Additionally, revenue per rooftop increased, surpassing the NADA average by 18% to reach $13.1 million.
The Southern United States emerged as the dominant region for buy/sell activity, capturing a record 51% market share, reflecting a 20% year-over-year increase. Despite blue sky values declining 19% from their 2022 peak, they remained historically high, driven by a liquid and active market. Ryan Kerrigan, Managing Director of Kerrigan Advisors, anticipates that valuations will rebound in 2025 as industry earnings recover and buyer demand remains robust.
The 2024 Kerrigan Dealer Survey revealed significant shifts in dealer sentiment, with a 258% increase in dealers considering selling compared to 2022. Simultaneously, there was a 16% rise in dealers planning to grow their operations, while the number of those opting for no changes declined by 12%, underscoring a market in transition.
Key 2025 Buy/Sell Market Trends
- High Dealership Real Estate Values: Rising property values, fueled by strong retail sales and high construction costs, continue to impact transaction valuations. Since 2014, dealership real estate values have surged by 51%, reaching an average of $13.9 million per property, helping to offset declines in blue sky values.
- OEMs Increasing Right of First Refusal (ROFR) Usage: OEMs exercised a record number of ROFRs in 2024, leading to growing dealer dissatisfaction and reduced trust in manufacturers. The Kerrigan Dealer Survey showed a 25% increase in dealers expressing “no trust” in their OEMs, highlighting escalating tensions within the franchise system.
- Chinese OEM Market Influence: China, which has led global auto sales since surpassing the U.S. in 2009, continues to reshape the industry landscape. In 2024, the sales gap between China and the U.S. widened to 13.9 million units, with declining sales in China negatively impacting legacy OEMs such as Volkswagen, General Motors, and Nissan. These challenges have prompted significant restructuring efforts among global automakers.
Franchise Valuation Trends
Brands with strong dealer trust, such as Toyota and Lexus, saw increasing blue sky multiples. Toyota’s multiple rose to 7.0x-8.0x, while Lexus’ high-end multiple climbed to 10x, reflecting strong dealer relationships and sustained profitability. Kia also experienced an increase in its multiple range (4.5x-5.5x) due to continued high profitability and buyer demand.
Conversely, struggling franchises such as CDJR, Nissan, Audi, and Volvo witnessed declining blue sky multiples. CDJR and Nissan fell to 2.5x-3.25x due to weak performance and buyer hesitation. Audi’s high-end multiple dropped by 0.5, while Volvo’s declined from 4.0 to 3.5 amid rising inventory levels and profitability challenges.
2025 Outlook and Market Considerations
Potential import tariffs under the Trump administration could impact blue sky values, as higher vehicle costs may lead to margin compression. However, most dealers expect OEMs to implement strategic measures to mitigate these costs.
2024 Market Highlights:
- 438 dealership transactions, a 10% increase from 2023.
- 697 franchises sold, the second highest on record.
- Multi-dealership transactions declined to 97 (22% of total), marking the lowest share on record.
- Domestic market share declined by 7% in favor of import luxury brands and by 6% in favor of import non-luxury brands.
- U.S. public dealer groups were net sellers, divesting a record 47 franchises.
- The Southern U.S. dominated buy/sell activity, reaching a 51% market share, up 20% from 2023.
The Blue Sky Report®, published by Kerrigan Advisors, remains the auto retail industry’s most comprehensive resource on dealership mergers and acquisitions (M&A) activity and franchise valuations. Its insights continue to guide industry stakeholders in navigating the evolving market landscape, helping dealers, investors, and OEMs make informed strategic decisions.
