The auto dealership buy/sell market experienced a 15 percent decline in activity during Q1 according to the Kerrigan Advisors First Quarter 2025 Blue Sky Report. The dip was largely due to uncertainties surrounding the Trump administration’s auto tariffs.
There were 94 transactions completed in the first quarter, down from 109 in the same period last year. Still, resilient dealership earnings and tight inventory levels have buoyed confidence throughout the sector. Average public dealership earnings rose to $1.03 million in Q1, a seven percent year-over-year increase. This marks the first earnings growth since 2022. The Kerrigan Blue Sky Index was flat in the first quarter and is still 70 percent above 2019 levels.
Despite the first quarter transaction slowdown, the market is expected to remain robust, with rising confidence from both executives and dealership owners. Kerrigan Advisors is still estimating nearly 400 transactions this year.
“Economic uncertainty has had some impact on the buy/sell market in the first quarter of 2025, but its fundamentals remain strong, and 2025 is shaping up to be another solid year for transactions,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors. “With dealership earnings on the rise, record buyer liquidity, and a steady flow of single-store sellers coming to market, we predict that activity will accelerate in the second half of 2025 and valuations will remain strong – particularly in high-growth regions like the South, where premiums are being paid because demand continues to outpace supply.”
Dealership Consolidation
Tariffs have already influenced public dealership strategies, with nearly half of public dealer group capital allocated to stock buybacks rather than acquisitions in Q1. U.S. dealership acquisition spending was just $154 million to start the year, down from $1.19 billion in 2024. Kerrigan Advisors believe this is just a short-term shift though, as the broader trend of industry consolidation continues.
The Top 150 dealerships accounted for 33 percent of industry revenue in 2024, an increase of 10 percent from 2023. That number will most likely continue to rise as more single dealerships go up for sale. Private single-store sellers are entering the market in higher numbers due to mounting operational costs, including facility upgrades and EV infrastructure demands. Single-store transactions were 79 percent of all dealership sales in Q1, up from 68 percent in 2023.
Meanwhile, OEMs are favoring fewer, larger dealership groups that can meet complex operational demands. According to Kerrigan Advisors OEM survey, one-third of OEM executives plan to reduce dealer counts over the next five years.
“If the Trump administration proceeds with broad-based auto tariffs, OEMs, rather than dealers, will likely absorb most of the cost,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors. “The strategic industry consolidators know this and are taking a long-term view when seeking prized dealership assets. We do not expect the final tariff policy to meaningfully impact 2025’s buy/sell activity, though we will see some changes in franchise valuations with certain winners and losers depending on OEM’s US manufacturing capabilities and financial capacity to effectively react.”
2025 Outlook
Despite the current tariff uncertainty, market optimism remains high. Toyota continues to command premium valuation due to its strong U.S. manufacturing presence and financial stability. Luxury franchises such as BMW, Lexus, and Porsche are also well-equipped to absorb tariff costs, given their higher profit margins and affluent customer base. The impact of tariffs is not yet fully known, but it appears as if it will not be even across all brands.
“The buy/sell market is becoming more polarized between high and low demand franchises. This situation will likely become even more exacerbated when tariffs are finalized, with certain franchises better positioned than others to absorb the expense. Top consolidators are doubling down on the strongest franchises and geographies,” said Ryan Kerrigan. “With earnings rebounding and the policy environment evolving, we anticipate a reacceleration of buy/sell activity in the second half of 2025, especially if tariffs are reduced.”
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