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Used Car Sales Fuel Franchise Operations

The 2019 auto dealership buy/sell market stayed steady and on course for yet another 200-plus transaction year in 2019, with 103 completed transactions year-to-date. According to the just-released Second Quarter 2019 Blue Sky Report by Kerrigan Advisors, a decline in new vehicle sales spurred dealers to turn to their higher margin business segments, resulting in an increase in gross profit and earnings.

Fixed operations and used vehicles represent 75.9 percent of the average franchise dealer’s gross profit, while new vehicles represent just 24.1 percent of gross profits.

Kerrigan noted that since 2014, an estimated 1,000 dealers have sold their businesses, representing 12 percent of the total dealer network. Sellers continue to come to market at a high rate, while the buyer pool grows with new capital seeking investment in auto retail thanks to a diversified and high-margin business model that hedges against an uncertain economy.

Other highlights from the report:

  • Average dealership earnings increased 1 percent over the trailing 12 months ending in June, the first increase in dealership earnings since 2015.
  • Since 2014, fixed operations and used vehicle gross profits have increased 10.8 percent and 27.6 percent, respectively. By contrast, new vehicle gross profits have declined 7.6 percent.

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