68% of dealers project valuations will increase, or remain at 2024 levels driving strong interest in acquisitions over the next 12 months; Toyota/Lexus are most trusted among dealers for the second consecutive year, but CDJR faces declining valuations and lowest-ever trust ranking, according to the recently released 2024 Kerrigan Dealer Survey.
INCLINE VILLAGE, Nev.--(BUSINESS WIRE)--The majority of auto dealers maintain a positive outlook on the valuation of their dealerships over the next twelve months as profits normalize, according to the newly released 2024 Kerrigan Dealer Survey. The survey, which queried over 635 auto dealers to gather insights on the future value of their businesses, franchise valuations and acquisition trends, revealed that more than half (51%) anticipate that 2024 valuations will remain at elevated levels into 2025, while 17% foresee an increase in valuations.
With the stabilization of pre-tax earnings, 43% of dealers surveyed view current earnings as a reliable indicator of future performance. This confidence in earnings reflects the normalization of dealership profits experienced by many franchises in 2024 and is the likely driver behind their continued optimism about valuations.
An increasing minority of dealers, 43%, have a more negative outlook on profits than in 2024, with new electric vehicle (EV) sales having the most adverse influence: 77% expect EVs will negatively impact profitability in 2025. By contrast, the vast majority of dealers expect hybrid new vehicle sales (77%) and parts and service (75%) to enhance 2025 earnings. Additionally, nearly half of dealers surveyed expect investment in OEM facilities to negatively impact future profits.
“Despite a moderation in profits, auto dealer sentiment remains upbeat on 2025’s valuations, directly impacting acquisition activity in the coming year,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors. “As the survey reveals, compared to last year, more dealers are expecting an increase in overall buy/sell activity, with more anticipating adding one or more dealerships to their portfolio in 2025. This aligns with the industry’s view that scale will be crucial in the evolving auto retail landscape, prompting enterprises to either expand or sell as consolidation continues.”
According to the survey, 49% of dealerships expect to add one or more dealerships in 2025 compared with 47% in 2024, while fewer, 44%, expect no change in the number of dealerships they plan to add or subtract, compared to 47% in 2024. The percentage expecting to sell one or more dealerships has inched up to 7% from 6% in 2024, perhaps reflecting the slight increase in those who have a negative outlook on profits and valuations.
While most dealers in the survey believe franchise values will either increase or remain the same over the next 12 months, certain franchises saw a sharp decline in valuation expectations, largely correlated with an oversupply of new vehicle inventory and a significant decline in franchise profitability.
Dealers expect that Lexus, Toyota, Honda, Kia, and Subaru will see the highest gains in valuation over the next 12 months, with over 30% anticipating an increase in their value. This marks the first time Lexus has led the category, while Honda returns to the top five list after being absent last year. However, Kia, which led the category last year, experienced an 11-percentage point decline in dealer expectations and Hyundai, which held the second-highest valuation expectations last year, did not even make the top five.
Over 64% expect CDJR, Infiniti, Lincoln and Nissan to decline in value in the next 12 months. Notably, CDJR and Nissan saw a 20-percentage point increase in the percentage of dealers expecting a decrease in valuation.
Kerrigan Advisors again measured dealers’ trust level in each franchise. Toyota continues to rank #1 by a wide margin, with 83% of dealers showing a high level of trust in the franchise, nearly 3.5x higher than the survey average of 24%. Conversely, 72% of dealers reported they had no trust in CDJR which is consistent with the valuation degradation expectation.
“The ‘no trust’ levels for Stellantis, Lincoln, Infiniti and Nissan are the highest we’ve seen since we first asked this question. For context, the worst result previously recorded by any franchise was Ford at 48% ‘no trust’ – but Stellantis has now reached 72% and Nissan is at 58%,” said Erin Kerrigan.
For the first time in the survey, Kerrigan Advisors asked dealers which franchises they are seeking to add to their enterprise in 2025. The results are consistent with Kerrigan Advisors’ proprietary Buyer Database of more than 1,000 dealership buyers. “Toyota and Lexus are by far the most requested brands in our Buyer Database and in this year’s survey,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors. “The measured approach the OEM takes to network size, EV strategy and inventory management are highly attractive to dealers today. Dealers are seeking to invest in franchises they trust, and Toyota and Lexus continue to reign supreme in that category.”
“A significant number of dealers will look to acquire dealerships in the year to come, indicating a positive industry outlook overall. Nevertheless, dealers have distinctly varying views on specific franchises, with certain OEMs eliciting a lack of trust and confidence, while others earn a high level of trust and strong profit expectations. Based on these results, Kerrigan Advisors believes 2025 will be a robust year for buy/sell activity with buyers seeking the most trusted brands and continuing to divest of those they find more challenging,” concluded Ryan Kerrigan.
The data for The Kerrigan Dealer Survey was gathered from Kerrigan Advisors’ annual survey of auto dealers in conjunction with the issuance of The Blue Sky Report. The Kerrigan Dealer Survey is based on over 635 anonymous responses from franchised auto dealers in Kerrigan Advisors’ proprietary dealer database. Responses were collected from June 2024 to November 2024.
Kerrigan Advisors is the leading exclusive sell-side advisor and thought partner to auto dealers nationwide. Since its founding in 2014, the firm has led the industry with the sale of over 280 auto dealerships representing $9 billion in client proceeds, including the third largest transaction in auto retail history – the sale of Jim Koons Automotive Companies to Asbury Automotive Group. Kerrigan Advisors advises the industry’s leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, consulting, accounting, finance and real estate, we not take listings nor do we employ a brokerage model; rather we develop a customized sales approach for each client to achieve their personal and financial goals. In addition to the firm’s sell-side advisory services, Kerrigan Advisors also provides a suite of automobile dealership consulting and investor services including growth strategy, market valuation assessments, capital allocation, transactional due diligence, open point proposals, operational improvement and real estate due diligence.
Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, the industry authority on dealership buy/sell market trends and valuations and includes Kerrigan Advisors’ signature blue sky charts, multiples and analysis for each franchise in the luxury and non-luxury segments. To download a preview of the report, click here. The firm also releases The Kerrigan Index™ comprised of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail Index is designed to track dealership valuation trends, while also providing key insights into factors influencing auto retail. To access The Kerrigan Index™, click here. To read the 2024 Kerrigan Dealer Survey, click here. To read the 2024 Kerrigan OEM Survey, click here. Kerrigan Advisors also is the co-author of NADA’s Guide to Buying and Selling a Dealership.
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