The U.S. auto dealership buy/sell market achieved record-setting momentum in 2024, with 438 completed dealership transactions -- a 10% increase over 2023 -- according to Kerrigan Advisors’ just-released 2024 Annual Blue Sky Report.
A total of 697 franchises were sold last year, marking a 2.5% increase over 2023 and the highest volume since 2021. This surge was fueled by improving vehicle affordability, moderating inflation and heightened buyer optimism about long-term industry profitability.
“With interest rates lower, inflation moderating and vehicle affordability improving, new vehicle sales saw a significant uptick throughout the year, further boosting buyer confidence,” said Erin Kerrigan, founder and managing director of Kerrigan Advisors.
Kerrigan noted this confidence surged post-election, driving a sharp rebound in new vehicle sales and prompting a broader market consensus that 2024 marked a low point in earnings -- with future growth expected. Earnings for the industry remain 78% higher than pre-pandemic levels, even after adjusting for inflation.
“If gross profit per new vehicle retailed stabilizes at 2024 averages, and new vehicle volumes return to historical rates, industry earnings should normalize well above pre-pandemic levels,” the report said, estimating more than $40 billion in potential gross profit.
Market Polarization and Franchise Divergence Deepen
The report also indicated a growing bifurcation in franchise performance. Strong-performing franchises like Toyota, Lexus, BMW and Honda maintained low days’ supply and high valuations, while weaker brands such as CDJR, Nissan and Lincoln struggled with ballooning inventory and plummeting profitability.
“Not surprisingly, valuations for underperforming/weaker franchises fell sharply in 2024 as dealer confidence in those OEMs declined,” said Kerrigan.
Distressed sales and discounted valuations rose sharply, with many smaller dealers -- typically owning fewer than three rooftops -- unable to absorb losses from struggling franchises.
Single-store sales surged as multi-dealership transactions dropped to 22% of total deals, down from 32% in 2023. However, the 97 completed multi-dealership deals in 2024 still marked the third-highest total on record.
Private Groups and Southern States Lead Consolidation Trends
Private dealership groups drove consolidation at an accelerated pace, with Automotive News’ Top 150 Dealership Groups acquiring 28% of franchises and now accounting for more than 30% of total industry revenue.
The South emerged as the dominant region for buy/sell activity, representing 51% of all transactions, a 20% year-over-year increase.
Blue Sky Values Remain Elevated Despite Decline from 2022 Peak
While average blue sky values were 19% below their 2022 peak, valuations remained historically high, supported by dealership real estate values, which have climbed 51% since 2014 to an average of $13.9 million.
“Rising real estate valuations have offset this drop, keeping total dealership enterprise values near record levels in 2024,” said Ryan Kerrigan, managing director of Kerrigan Advisors.
Dealer Sentiment and Trust Drive Multiples
Trust in OEMs has become a key determinant of blue sky multiples. Toyota, Lexus and Kia saw multiple increases, driven by dealer trust and strong financial performance. Toyota’s multiple now ranges from 7.0x to 8.0x, while Lexus commands the highest multiple in the industry -- up to 10x on the high end.
In contrast, CDJR and Nissan saw their multiples downgraded to 2.5x to 3.25x, reflecting poor franchise performance and low dealer trust. Audi and Volvo also experienced reduced valuations, with Volvo’s outlook downgraded to negative amid declining profitability and rising inventory levels.
2025 Outlook: Valuations, OEM Influence, Global Headwinds
Looking ahead, Kerrigan Advisors identified three trends set to shape 2025: high dealership real estate values, increased OEM right of first refusals (ROFRs), and the growing global impact of Chinese automakers.
ROFR activity has eroded dealer trust, with the 2024 Kerrigan Dealer Survey showing a 25% “no trust” response rate in OEM relations -- up 19% year-over-year.
Meanwhile, legacy OEMs continue to face financial pressures from China’s dominance in global vehicle sales, with General Motors recording a $5 billion Q4 restructuring charge due to its declining Chinese business.
“As OEM-dealer relations continue to evolve, trust will play a defining role in shaping franchise valuations and determining which brands retain their competitive edge,” said Erin Kerrigan.
Despite global headwinds and potential import tariffs in 2025, Kerrigan Advisors anticipates continued market activity, driven by strong buyer demand and improving dealership profitability.
“As dealers and their families plan for 2025 and beyond, the choice between growth and exit will be front and center,” said Ryan Kerrigan.
