Kerrigan Advisors’ annual Dealer Survey is designed to gauge dealer sentiment on the future value of their businesses, franchise earnings and valuation expectations, as well as perspectives on their trust levels with each OEM. The survey also queried dealers regarding the performance of their business segments, as well as their views on real estate investments.
Kerrigan Advisors’ annual Dealer Survey is designed to gauge dealer sentiment on the future value of their businesses, franchise earnings and valuation expectations, as well as perspectives on their trust levels with each OEM. The survey also queried dealers regarding the performance of their business segments, as well as their views on real estate investments.
The results of the sixth annual Kerrigan Dealer Survey found that the majority of dealers have a positive outlook on dealership valuation, with 51% projecting valuations will remain at 2024’s elevated level in 2025 and 17% projecting an increase. That said, a rising share of dealers (32%) expect valuations will decrease in the next 12 months. This marks the third consecutive increase in the percentage of respondents who have a negative sentiment on valuation and a fivefold rise from 2021’s low. Notably, the percentage of dealers projecting an increase in valuation was also the lowest on record at 17%, 44 percentage points below 2021’s peak and below 2019.
The rise in negative valuation expectations is consistent with dealers’ pessimistic views of profitability in 2025. 43% of dealers surveyed project profits will decline next year, an increase from last year and the highest level in four years. By contrast, just 14% expect a rise in earnings, slightly lower than 2023. 43% of dealers believe current earnings are indicative of future earnings, which speaks to the normalization of dealership profits in 2024 and is likely the driver behind the 51% of respondents who expect valuations to remain the same in 2025. Kerrigan Advisors believes dealers’ divergent perspectives on profitability reflect the earnings volatility of weaker franchises, particularly those whose days’ supply ballooned in 2024 resulting in dramatic declines in franchise profits when compared to the pandemic years.
Of the business segments impacting dealership profitability, new electric vehicles (“EVs”) are seen as the most detrimental, with 68% of dealers projecting a negative impact on dealership profitability over the next 12 months. Only 5% of respondents expect EV sales will have a positive impact on 2025 dealership profitability. By contrast, new hybrid vehicle sales and service and parts are projected to enhance 2025 earnings with 73% and 75% of respondents, respectively, indicating a positive outlook.
Consistent with dealers’ negative view on EVs, nearly half of dealers surveyed (48%) believe OEM facility investments, including those required for EVs, will have a negative impact on future dealership profits. Only 15% project real estate and property investments required by the OEM will result in higher future profits. This is particularly true at today’s inflated construction costs, which increase the carrying cost of real estate and the price of facility investments.
It appears the negative sentiment regarding valuation, profits, EVs and real estate is causing a further uptick in dealers considering a sale. A rising minority (7%) reported they plan to sell one or more dealerships in 2025, up 5 percentage points from 2022 for a 250% increase in three years. Interestingly, fewer dealers plan for no change, consistent with the industry hypothesis that auto retail will increasingly require scale, resulting in the need to either grow the enterprise or sell as the industry consolidates.
Note: These results reflect the view of the 635+ dealers surveyed, regardless of a dealer’s specific franchise ownership.
While the majority of dealers surveyed believe individual franchises will either increase or remain the same in value over the next 12 months, certain franchises saw a dramatic decline in valuation expectations, largely correlated with an oversupply of new vehicle inventory and a significant drop in franchise profitability. Interestingly, in the luxury segment, which has seen valuations rise to record levels in recent years, every franchise, with the exception of Lexus, saw a projected decline in valuation expectations for 2025.
Highest Expected Valuation Gains:
Lexus, Toyota, Honda, Kia & Subaru
Over 30% of surveyed dealers expect these five franchises to increase in value in the next 12 months. This marks the first time Lexus has led the category and a return for Honda, which did not make the list last year. Notably, Kia, which led the category last year, declined 11 percentage points this year, and Hyundai did not make the list, after ranking the second highest in valuation expectations last year.
Least Likely to Decline in Value:
Lexus, Toyota, Subaru, Porsche, BMW & Honda
86% or more of surveyed dealers expect these five franchises to either increase or remain the same in value in the next 12 months. Toyota has ranked as the non-luxury franchise least likely to decline in value for six consecutive years, while Lexus has ranked as the luxury franchise least likely to decline in value for four consecutive years.
Highest Expected Valuation Declines:
CDJR, Infiniti, Lincoln, Nissan
Over 64% of surveyed dealers expect these franchises 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.
For the second time, Kerrigan Advisors queried dealers about their trust level in each franchise. Toyota again received the top results by far, with 83% of dealers indicating they had a high level of trust in the franchise, nearly 3.5x higher than the survey average (24%). By contrast, 72% of dealers reported they had no trust in CDJR, consistent with the expectation of a decline in future CDJR valuation.
The most trusted franchises are those who are least likely to see a decline in valuation, while the least trusted are largely the franchises most expected to decline in valuation.
Notable improvements were made by certain franchises in the trust category this year. Specifically, Ford saw the largest improvement in dealers who had no trust in the franchise, while Honda had the biggest increase in dealers who had a high level of trust in the franchise. Both of these OEMs have made big strides in addressing dealers’ concerns regarding their inventory levels and EV rollout strategy, resulting in a significant enhancement in dealer trust.
For the first time, 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 nationwide.
Toyota and Lexus are by far the most requested brands in our Buyer Database and in this year’s survey. The OEM’s measured approach to network size, EV strategy and judicious 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.
Honda:
Toyota/Lexus:
Ford:
CDJR:
Nissan:
Hyundai:
The 2024 Kerrigan Dealer Survey results demonstrate the everchanging auto retail environment and the fluidity of dealers’ perspectives regarding their OEMs. The majority of dealers project profits and valuations will remain at or rise above post-pandemic levels in 2025, though an increasing minority have a more negative outlook. A significant number of dealers seek to acquire dealerships in the next 12 months, an indication of an overall positive industry outlook. That said, 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.
The data for The Kerrigan Dealer Survey was gathered from Kerrigan Advisors’ sixth annual survey of auto dealers in conjunction with the issuance of The Blue Sky Report®. The Kerrigan Dealer Survey is based on 635+ anonymous responses from franchised auto dealers in Kerrigan Advisors’ proprietary dealer database. Responses were collected from June 2024 to November 2024.
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