BV experts outline industry conditions affecting auto dealerships

BVWireIssue #95-1
August 4, 2010

During last week’s BVR webinar “Valuing Auto Dealerships” Carl Woodward (Woodward & Associates), Kevin Yeanoplos (Brueggeman and Johnson Yeanoplos) and James Alerding (Clifton Gunderson) provided expert insight about valuing an auto dealership in today’s economy. Some of the points made concerning industry conditions include: Woodward pointed out that some profits have stayed high because the LIBOR rate is so low and inventory is priced at an artificially low level. ”That’s not going to last for ever, so floorplan costs are going to go up for dealers in the near future.” What changes in the market are permanent? ”A lot of the discussion I hear from industry leaders is that there’s a new normal for car sales. Consumers will hold on longer,” reported Yeanoplos. ”Green cars are also a permanent change, compounded by investment in mass transit,” he added. Increased union presence, particularly in the west, locks in some liabilities for buyers. Another issue is that auto dealer real estate is likely to recover in value slower than other sectors, since “these building are generally single purpose, and there are more sellers than buyers,” said Alerding. Audio recordings, including all webinar materials, are available here.
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