Last year was a tumultuous time to be in auto retail. Between tariffs, expiring EV tax credits and general affordability issues, dealers were not exactly full of optimism for most of the year. However, that didn’t stop some of them from purchasing a new dealership.
According to the 2025 Blue Sky Report® by Kerrigan Advisors, the industry saw a record-breaking 458 transactions completed. This activity represented the sale of 688 franchises, marking a 5% increase from the previous year and signaling a robust appetite for acquisition and consolidation.
Unprecedented Market Momentum and Turnover
More than 3,500 franchises have changed hands in the US over the last five years. This represents an estimated 15% turnover rate for all domestic franchises, nearly double the pace of the five years preceding the pandemic. Public dealership groups are leading this charge with massive capital deployment. In 2025 alone, public retailers allocated nearly 50% of their capital—approximately $4.4 billion—to US dealership acquisitions. However, the strategy behind these acquisitions is becoming increasingly targeted.
The report revealed that the average number of franchises sold per transaction declined to just 1.5, the lowest level recorded by Kerrigan Advisors. This drop highlights a shift from broad, opportunistic buying to highly selective expansion. Consolidators are prioritizing specific geographic density. In fact, 60% of all franchises acquired in 2025 were located within markets where the buyer already maintained an operating presence.
“While buy/sell activity was strong in 2025, the valuation environment is increasingly bifurcated, with high-performing franchises continuing to command price premiums, while lower performing or smaller-scale dealerships face more limited buyer interest,” said Erin Kerrigan, Founder and Managing Director of Kerrigan Advisors. “The leading consolidators are also becoming more precise and strategic with their capital deployment, prioritizing scale within existing markets and targeting high-volume dealerships to drive operational efficiencies.”
Financial Performance Highlights Sustainable Growth
The foundation of this aggressive market is the sustained financial health of the dealerships themselves. While pandemic-level margins have softened, profitability remains higher than historical norms.
Average pre-tax earnings for public dealerships stabilized at roughly $4.1 million per location in 2025. This equates to a 3.6% net-to-sales margin and sits an impressive 87% above pre-pandemic averages. Buyers now have the confidence to view these figures as a sustainable floor rather than a temporary peak.
“The industry’s earnings performance remains exceptionally strong, fueling buyer demand for dealerships and sustaining the pandemic era seller’s market, particularly for the top franchises,” said Ryan Kerrigan, Managing Director of Kerrigan Advisors. “Many dealers continue to benefit from OEMs’ more disciplined inventory levels, higher new vehicle margins and robust fixed operations growth, all of which are contributing to sustained profitability above historical norms.”
New vehicle sales performance further supports this optimism. Retail light vehicle sales climbed to 14.5 million units in 2025, surpassing 2019 volumes and pushing total industry revenue to a new all-time high. Concurrently, new vehicle gross profit per unit normalized at an average of $3,383. This gross profit figure remains 63% higher than 2019 levels.
Fixed Operations and Used Inventory Drive Stability
Beyond new car sales, service lanes and used vehicle lots are providing massive earnings stability for retail operators. Fixed operations have proven to be a reliable and growing profit center. Driven by an aging US vehicle fleet and increased consumer reliance on vehicle maintenance, average fixed operations gross profit exceeded $5 million per dealership in 2025.
After years of constrained used supply due to lower leasing rates during the pandemic, inventory relief is on the horizon. The report projects that lease maturities will rise meaningfully through 2027, eventually reaching an estimated 3.2 million returning units. This influx of lease returns will replenish depleted used vehicle supplies, supporting higher transaction volumes and bolstering dealership profitability in the secondary market.
Brand Spotlights, Disruptors, and Rising Multiples
The Kerrigan Blue Sky Index, which tracks franchise valuation strength, closed the year at 176. This figure sits 76% above 2019 levels, underscoring the massive wealth creation over the last five years. Certain brands saw notable multiple increases due to exceptional product performance and dealer trust. Honda, for example, saw its low-end multiple increase to 5.5. The brand re-established itself as a highly sought-after non-luxury franchise, driven by industry-leading hybrid sales, low days’ supply, and outstanding inventory management.
At the same time, the report highlights the growing impact of technology-driven disruptors like Carvana. Expanding into the new vehicle market with the addition of six Stellantis franchises, Carvana is challenging traditional retail benchmarks. Utilizing an AI-enabled operating model, the company generated $598 million in revenue and 17,548 retail units per location last year. To put that in perspective, the average Top 150 dealership group generated $83 million in revenue per rooftop. Furthermore, Carvana reduced its personnel expense to just 20% of gross profit, demonstrating how technology platforms can amplify throughput while drastically cutting labor costs.
“While the disruption ahead concerns some dealers, it is ultimately more likely to produce a structurally stronger and more profitable auto retail sector for growing dealer groups,” said Erin Kerrigan. “Well-capitalized consolidators are leaning into this transition with disciplined acquisition strategies – for them, industry transformation represents opportunity, not threat, and will be the key driver of continued consolidation in 2026 and beyond.”
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