Buy/sell activity declined 15% in Q1 2025, but rising dealer earnings and tight inventory fuel confidence, with buy sell market on pace for nearly 400 transactions in 2025.
Kerrigan Advisors pauses blue sky multiple and outlook adjustments as tariff uncertainty clouds near-term outlook.
INCLINE VILLAGE, Nev.--(BUSINESS WIRE)--Trump’s tariffs, and the resulting geopolitical uncertainty and financial market volatility, slowed the auto dealership buy/sell market in the first quarter of 2025, according to the just-released Kerrigan Advisors First Quarter 2025 Blue Sky Report.
Buy/sell activity declined 15% year-over-year, with 94 transactions closed, compared to 109 in the first quarter of 2024. Nevertheless, the market remains historically strong and, Kerrigan Advisors predicts, is on pace to reach nearly 400 transactions in 2025, well above the pre-pandemic average. As auto dealerships posted their first quarterly earnings increase since 2022, seasonally adjusted annualized rate of sales (SAAR) rose and inventory remained tight, fueling sustainably high gross margins.
“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.”
Despite the slowdown in buy/sell activity in the first quarter, average public dealership earnings rose year-over-year for the first time since 2022 – increasing from $0.96 million in Q1 2024 to $1.03 million – driven by stable gross profit per vehicle, the surge in new vehicle sales and growth in the parts and service business. Results from the recently released Kerrigan OEM Survey and Kerrigan Dealer Survey indicate rising confidence from both auto executives and dealers that earnings are stabilizing. This optimism regarding the auto retail business stems from the expectation that OEMs, rather than dealers or consumers, will likely bear the brunt of any tariff expense. OEMs are well positioned to do so as their gross margins are significantly higher than dealers and most OEMs are reticent to lose hard-fought market share in the lucrative and competitive US auto sector.
“Dealerships continue to demonstrate remarkable resilience, with strong vehicle margins and stable demand underpinning earnings growth,” said Erin Kerrigan. “This performance, especially in a volatile macro environment, reinforces why dealership buyers remain confident in the long-term fundamentals of auto retail. Most expect the costs of tariffs will primarily be borne by the OEM and that lower supply could in fact result in higher profits, much like the situation during the pandemic.”
The Trump Administration’s March announcement of broad-based auto tariffs sent shockwaves through the financial markets, triggering a 21% decline in the Kerrigan Index of the seven publicly traded auto retailers by mid-April and pushing the CBOE Volatility Index to its 18th highest level in history. In response, the public dealer groups dramatically shifted their capital allocation strategies. Nearly half of their available capital in the first quarter was directed toward stock buybacks, while U.S. dealership acquisition spending fell to just $154 million, down sharply from $1.19 billion in Q1 2024. This is part of the reason for the slowdown in buy/sell activity during the quarter. That said, Asbury Automotive announced a significant $1.4 billion acquisition of Boston-based The Herb Chambers Companies, expected to close later in 2025 - demonstrating mega deals are still coming together and the industry consolidation trend is uninterrupted by tariffs.
“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.”
In the First Quarter 2025 Blue Sky Report, Kerrigan Advisors identified the following three important trends that are expected to meaningfully impact the auto retail market in 2025.
With the Top 150 dealer groups now generating a third of industry revenue, many smaller dealers are struggling to compete – especially as OEM demands and tariff exposure increase operational risk. Facility upgrades, EV infrastructure, and rising capital costs are pushing more owners to consider a sale. According to the 2025 Kerrigan OEM Survey, 92% of OEMs plan to maintain or increase facility requirements in the next five years. Buyer demand for single stores remains strong, particularly among regional consolidators seeking to build scale in major metros.
Public buyer liquidity rose to a record $8.35 billion in the first quarter of 2025, and well-capitalized groups are deploying capital strategically, prioritizing economically-sound OEMs with US manufacturing and limited tariff exposure. Toyota continues to command premium multiples, while franchises with greater import dependence may see softening demand. Geographically, buyers remain focused on business-friendly, high-growth markets, particularly in the South, which accounted for 51% of all US buy/sell transactions in 2024.
One-third of OEM executives surveyed in the recent Kerrigan Advisors OEM Survey plan to reduce dealer count over the next five years, and nearly 30% expect to exercise their ROFR on at least a quarter of transactions. Seventy-four percent say they intend to partner with dealers on customer data and relationship management—further aligning networks around better-capitalized operators. As OEMs reshape their dealer footprints, consolidation is likely to accelerate.
With tariff policy still in flux, Kerrigan Advisors maintained all blue sky multiples and outlooks this quarter. Most buyers and sellers are continuing to price deals using trailing twelve-month earnings and current published multiples, awaiting clarity from the Trump Administration’s expected trade negotiations in the coming quarters.
Should tariffs remain in place at elevated levels, Kerrigan Advisors anticipates a widening divide in franchise valuations. OEMs with substantial US manufacturing capabilities, such as Cadillac, Ford, Stellantis, Toyota and Honda, are well positioned to retain positive outlooks given their lower import exposure and financial strength. Conversely, franchises tied to OEMs with limited US production and weaker balance sheets, could face downward pressure on valuations if tariffs become permanent. Well-capitalized import luxury franchises, including BMW, Lexus, Mercedes, Porsche and JLR, are expected to manage through higher tariffs with relative ease, thanks to their higher margins, which allow them to absorb more of the tariff expense, and the strength of the luxury US consumer.
“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,” added 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.”
The Blue Sky Report®, published by Kerrigan Advisors, is the auto retail industry's most comprehensive and authoritative quarterly report on dealership M&A activity, as well as franchise values. The quarterly report, received by over 12,000 industry recipients in 35 countries, includes analysis of all dealership transaction activity for the year, and lays out the high, average and low blue sky multiples for each franchise in the luxury and non-luxury segments. For more details and to preview the report, click here. To sign up to receive the quarterly report, click here.
Kerrigan Advisors is the leading sell-side advisor and thought partner to auto dealers nationwide. Since its founding in 2014, the firm has led the industry with the sale of more than 290 dealerships generating more than $9 billion in client proceeds, including two of the largest transactions in auto retail history – the sale of Jim Koons Automotive Companies to Asbury Automotive Group and Leith Automotive to Holman. The firm advises the industry’s leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, Kerrigan Advisors is the only firm in auto retail exclusively dedicated to sell-side advisory, providing its clients the assurance of a conflict-free approach.
Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, the industry authority on dealership buy/sell market trends and valuations and includes Kerrigan Advisors’ signature blue sky charts, multiples and analysis for each franchise in the luxury and non-luxury segments. To download a preview of the report, click here. The firm also releases The Kerrigan Index™ comprised of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail Index is designed to track dealership valuation trends, while also providing key insights into factors influencing auto retail. To access The Kerrigan Index™, click here. To read the 2024 Kerrigan Dealer Survey, click here. To read the 2024 Kerrigan OEM Survey, click here. Kerrigan Advisors also is the co-author of NADA’s Guide to Buying and Selling a Dealership.
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