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The Kerrigan Dealer Survey

The data for The Kerrigan Dealer Survey is based on over 680 responses from franchised auto dealers in Kerrigan Advisors’ proprietary database. Survey responses were collected from June 2020 to October 2020. Please contact us if you have any questions about The Kerrigan Dealer Survey.

Download The 2020 Kerrigan Dealer Survey

2020 Dealer Survey Q1 Chart

2020 Kerrigan Dealer Survey Highlights

Kerrigan Advisors’ second annual Dealer Survey was designed to gauge dealer sentiment about the future value of their businesses, as well as their perspective on franchise valuations and the current buy/sell market. The results of the survey found that dealers are largely optimistic about the valuation of their dealerships over the next 12 months, despite the economic turmoil associated with COVID-19. Of the 680 responses, 86% of dealers expect the valuation of their dealerships to remain the same or increase in value. Notably, 33% of dealers surveyed expect an increase in their business’ value, a 27% increase as compared to 2019’s results when only 26% of dealers expected their dealership value to increase. Only 14% of dealers surveyed in 2020 believe their value will decrease over the next 12 months.

Kerrigan Advisors’ Dealer Survey results are consistent with the firm’s assessment of the buy/sell market.  In our second quarter 2020 Blue Sky Report, we noted that blue sky values rose slightly in the first half of the year, despite earnings volatility due to a period of economic shutdown.  Our firm believes the rebound in auto sales coupled with reduced dealership expenses and higher vehicle margins will result in record industry earnings in 2020. Dealers’ valuation expectations reflect the strength of the auto retail business model in the face of a crisis and the expectation for continued sales and profit growth into 2021.


Highest Expected Valuation Gains:
Subaru, Toyota, Porsche, Honda, Mercedes-Benz, Lexus 

  • Over 25% of dealers surveyed expect to see an increase in these franchise values in the next 12 months, while less than 16% expect a decline.

Most Dependable Valuations:  BMW, Audi, Honda, Jaguar Land Rover, Mercedes-Benz

  • Over 60% of respondents expect these franchise values to remain the same over the next 12 months.
  • Audi and Jaguar Land Rover are new to this list from last year.

Highest Expected Valuation Declines: Nissan and Infiniti

  • The majority of dealers surveyed expect these franchises to decline in value in the next 12 months, while less than 8% believe they will increase in value.
  • Acura, Cadillac and Buick GMC are no longer on this list, as less than 50% of dealers surveyed expect their valuations to decline.

Most Improved Valuation Expectations since 2019: Buick GMC, Cadillac, Chevrolet, CDJR, Ford, Hyundai, Kia, Jaguar Land Rover, Toyota

  • These franchises saw an increase from last year in the number of dealers expecting a rise in value, while also seeing at least a 10 percentage point reduction in those who expect the franchise value to decline.
2020 Dealer Survey Q2 Chart

In the 2020 Kerrigan Dealer Survey, our firm noted an overall improvement in valuation and buy/sell activity expectations by surveyed dealers, which is consistent with our market observations. Kerrigan Advisors also saw a high correlation between the 2020 results and franchise demand in our proprietary Buyer Database. Franchises most expected to increase in value have the strongest buyer demand, while franchises most expected to decline in value have the lowest buyer demand. That being said, the majority of respondents believe franchise values will either hold steady or increase, except in the case of Nissan and Infiniti, where the majority of dealers surveyed expect a decline in value.

2020 Dealer Survey Q3 Chart

Of note in this year’s survey is the noticeable improvement of the domestic franchises. Chevrolet, Buick GMC and Ford saw on average a 7 percentage point improvement in the number of dealers who expect their franchise to increase in value and on average a 13 percentage point reduction in the number of dealers who expect a decline. These results are consistent with the improvements we are seeing in buyer demand for these franchises, particularly as the truck and SUV market continues to grow and gas prices remain low. 

Also, of interest in this year’s survey is the improved position of Jaguar Land Rover. In the 2019 survey, 40% of respondents expected the franchise would decline in value, whereas in the 2020 survey 73% believe the franchise will either increase or remain the same in value. Jaguar Land Rover’s rebound is a reflection of the strength of the luxury SUV market in 2020 and the benefit of low interest rates.

The results also highlight Toyota’s continued success and the value of its franchise. 37% of dealers surveyed expect the franchise to increase in value, up 7.4 percentage points from last year – more than any other franchise. This improvement is particularly impressive when considering Toyota commands the highest blue sky multiple amongst non-luxury franchises.

In this year’s survey, Kerrigan Advisors also asked dealers how COVID-19 would affect their acquisition plans and the buy/sell market. Interestingly, of the 680 dealers surveyed, the majority (64%) reported no change to their acquisition plans as a result of COVID-19.  Only 17% expect to be more acquisitive, while 19% plan to be less acquisitive. 

By contrast, 47% of dealers surveyed believe buy/sell activity will increase in the next 12 months.  Kerrigan Advisors attributes these conflicting responses to a rise in dealers who are considering a sale and thus expect more dealership buy/sells. These results are consistent with our expectations for a significant increase in buy/sell activity in the second half of 2020 and a growing pool of dealerships for sale over the next 12 months.

2020 Dealer Survey Q5/Q6 Chart

Methodology

In order to gain insight into dealers’ perspectives on dealership valuations, Kerrigan Advisors digitally surveyed franchised automotive dealers in the US and Canada. The survey was sent to dealers in Kerrigan Advisors’ proprietary database. The survey was conducted in conjunction with the release of The Blue Sky Report® from June through October 2020.

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