3 shocking signals redefining the buy/sell market—and how dealers are responding

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Welcome to The Breakdown, an analysis of auto retail’s top trends, moves, and insights—in under 5 minutes.

Recently, I had Alan Haig back on the Car Dealership Guy Podcast to discuss the dealership mergers and acquisitions (M&A) market. And what he told me was eye-opening.

Dealership profits are still 75% higher than pre-COVID levels. And rooftop transactions are down 39% year-over-year. Public companies are also stepping back, and there's a group of dealers who made big bets during the pandemic that are now coming back to haunt them.

Since then, I’ve spoken with a bunch of other dealers and industry professionals who shared similar signals with me. And I can’t shake the feeling that the buy/sell market is nearing a huge turning point…

The reason: Public companies are facing pressure from multiple directions, like elevated interest rates making financing more expensive, tariff uncertainty affecting future profitability projections, and shareholders questioning strategy.

That shareholder scrutiny means deals need to fit neat financial models and clear return thresholds. And when the bid-ask spread widens—as it has this year with sellers still anchored to 2022-2023 peak pricing—public companies step back rather than overpay.

But private buyers operate under completely different circumstances. They don't need to justify acquisition premiums to public shareholders. 

Universal learning: Public companies are looking more closely at divestitures so they can redeploy their capital elsewhere. However, private dealers are much more flexible and tolerant of risk.

"Audi has zero U.S. production. So, Audi may be more impacted by tariffs than just about any brand,” Alan said.

But you see—Audi has already been losing market share. And dealers are frustrated over facility requirements that cost more per square foot than other luxury brands (while also generating lower profits).

"We had one transaction where our buyer included two really good brands, A+ brands, and an Audi store. The buyer really began to reconsider their purchase when they heard about the tariffs," Alan explained.

Meanwhile, other brands are benefiting. Toyota's multiple increased 0.25 turns. Hyundai and Kia both saw 0.5-turn increases as dealers recognized their successful powertrain strategies.

Universal learning: Production location now directly impacts franchise values, with tariff exposure creating lasting competitive disadvantages.

Over the past couple of years, many dealerships and dealer groups sold for record high prices. But as the effects of the pandemic wore off, a lot of stores went from making money… to losing it.

You can see this “normalization” in profitability below—

"Nissan, Infiniti, Stellantis—those are brands where people have said, ‘well, I made some money during the pandemic, but I don't see a path to profitability right now, so I want to sell them,’" said Alan.

I also spoke with a prominent, highly acquisitive dealer (no, we’re not gonna put him on blast) who told me he’s currently buying a store for around $13 million less than the seller bought it for in 2022.

Whoa.

The problem: This seller was making money hand over fist during COVID with their other two stores, and thought their success would translate anywhere.

Spoiler alert—it didn't.

The store location, customer base, and brand dynamics were completely different from their other operations.

"These car dealers are crazy. They want to buy car dealerships in places they like personally, which is f***ing crazy to me," the acquisitive dealer told me. "If you like a city, buy a condo there. Don't buy a car dealership.”

Another dealer who was successful with import brands during the pandemic decided to expand and bought a struggling domestic brand store for over $15 million. After owning the store for just seven months, it had lost over $4 million, and now, the owner is selling.

And no, I don’t have hard data to back this trend up. But I do have dozens of anecdotes from dealers that tell me these aren't isolated incidents.

Universal learning: Overleveraged expansion during good times can create costly mistakes for dealers down the road.

And the correction is creating a two-tier market. Premium brands in great markets are still commanding strong valuations, but distressed dealers are selling at massive discounts to motivated buyers.

However, for dealers playing the long game, the path forward is clearer than ever:

Bottom line: In a tighter, riskier environment, discipline is the new alpha.

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Shout out to vAuto for making this episode possible!

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Shout out to Cox Automotive and DLRdmv for making this episode possible!

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