Q1 2024, however, was the busiest quarter on record for dealership buy-sells; market remains busy with a sustained appetite for strong franchises in attractive markets
Fort Lauderdale, Fla.—Haig Partners LLC released its Q2 2024 Haig Report, and the auto retail marketplace is evolving from record profits, blue sky values, and dealership sales. Due to several factors, dealership profits declined 32% in the first half of 2024 compared to the same period in 2023. The reduction in profits affects dealership values and the number of dealerships being sold, with smaller declines in both categories. Details are provided below.
Auto dealership buy-sell activity cools in Q2 after a record-setting Q1
In Q2, an estimated 84 rooftops traded hands, a 48% decline from the first quarter. While a steep drop, it is important to note that Q1 2024 was the busiest quarter on record for dealership buy-sells. Transaction volume for the first six months of the year is only down 14.5% from the same period in 2023. The market remains busy, with a sustained appetite for strong franchises in attractive markets. Haig predicts this year will rank as the fourth busiest year for U.S. dealership buy-sells in automotive history.
Dealership profits declined 32% in the first 6 months of 2024.
In Q2 2024, Haig estimates that the average dealership owned by public retailers made $1.0M in pre-tax income, a 35% decline from Q2 2023. Over the last twelve months (LTM), the average publicly owned dealership made $4.5M in pre-tax income, a 27% decrease from 2023 and a 33% drop from 2022, the peak year when the average dealership owned by the publics made an estimated $6.7M in pre-tax income.
If the first six months are taken into account and annualize them (meaning they are doubled), dealerships made $4.0M in pre-tax income, a decline of 25.5%. Looking ahead, Haig states it believes that average store profits will continue to decline for the remainder of 2024, but at a slower pace.
Blue sky values continue to decline but remain elevated.
According to Haig’s analysis, the estimated average blue sky value of a publicly owned dealership was $21.8M in Q2 2024. This value represents an 11% reduction from the blue sky value observed at the end of 2023, which Haig now perceives as the peak of the market. Haig noted that it would have expected a bigger decline by now, but earnings for most brands remain well above pre-pandemic levels.
More than five large dealership groups traded hands for more than a billion dollars over the past few years and record high values were paid for many franchises.
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