Auto dealerships: still driving the U.S. economy

BVWireIssue #61-3
October 17, 2007

“Auto sales account for the largest segment of our retail economy—over 22 percent—and dealerships employ more than one million people nationwide,” according to Dale Willey, chairman of the National Automobile Dealers Association (NADA), who spoke to the Automotive Press Association in Detroit last week.  “The industry as a whole is strong,” he added, referring to a projection by NADA Chief Economist Paul Taylor that new-car sales will be about 16 million at year’s end and that the past eight years have been the best in U.S. history.  Overall, America’s auto dealers post annual sales of $675.3 billion, for an average of $31.9 million per dealership, say the most current NADA statistics (based on 2006 economic activity).  An estimated 21,200 new-vehicle dealerships employ 1.2 million people nationwide.

Only fools use multiple of earnings.  But in its current edition of A Dealer Guide to Valuing an Automobile Dealership, NADA discourages using any rule of thumb, as these are rarely based on sound economic or valuation theory.  Sellers who rely on a multiple of earnings valuation should “go for it,” NADA says, “and maybe someone will be stupid enough to pay you a very high value.”

What are the current standards of practice to value this lucrative industry?  Can auto dealerships help drive your practice into a higher gear?  What practical issues and risk areas apply to this valuation niche?  Tomorrow’s BVR teleconference featuring Kevin Yeanoplos, CPA/ABV, ASA and Clayton Danielson, ASA will answer these questions and more. To register, click here.

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