The dealership mergers and acquisitions market was brisk in 2024, driven by buyers flush with cash from historically high dealership profits the last few years.

But dealership profitability, though still high, is waning. That is one factor that will impact the 2025 buy-sell market, which professionals expect to moderate though remain healthy.

“The buy sell market in 2025 will be active but quite different,” Alan Haig, president of Haig Partners, told Auto Remarketing.

Dealerships were selling for record high values in 2024, and “massive” dealership groups were trading hands, he said.

For example, Haig Partners acted as the sell-side advisor on the sale of Hendrickson Toyota in 2023, which sold for a record high value. That was eclipsed in 2024, however, by a record-high value for the sale of Ussury Motors Mercedes-Benz dealership in Coral Gables, Fla., said Haig.

Among the very large group deals in 2024 was Morgan Automotive Group’s acquisition of South Motors/Vista Motors, consisting of nine dealerships and two collision centers.

Less stellar franchises were still fetching high values in early 2024 as well, but that began to moderate later in the year. Those record high prices became limited to top brands only, said Haig.

“In the latter half of 2024 we were still seeing high prices paid for the best franchises because their earnings have held up quite well,” he said.

That includes Toyota and Lexus franchises as well as Honda and Mazda.

Those trends are likely to continue in 2025.

Brand and geography matter more than ever

Dealership profits in 2024 were down some 30%, George Karolis, president of The Presidio Group, told Auto Remarketing. The profit plunge has begun to level off, but dealers still face headwinds with higher expenses including labor and fixed costs.

“The story for 2025 is going to be brand and geography matter more than ever,” he said. “Some brands are going to win more than others.”

In 2023 and 2024, a shortage of inventory supported those high profits, and high prices, for pretty much every franchise.

“Our customers were buying everything they could and there was more demand than there was supply. Now we’ve flipped that narrative mostly,” he said, “especially on the domestic side and with some of the imports.”

Now that inventory is back to historical norms some brands including Stellantis and Nissan will continue to struggle in 2025, said Karolis.

Even with the uncertainty of the election gone, buyers in 2025 will be more selective about what franchises they acquire, he said.

It will remain a seller’s market, but sellers will need to be realistic about what their dealerships are worth, said Karolis.

“Buyers are pickier now even post-election because of the ever-changing environment,” he said.

Overpriced deals will have a harder time finding buyers, predicted Karolis, but “2025 should be a good year.”

Return of predictability

His group is sensing more excitement about investing, Dave Cantin, president and CEO of Dave Cantin Group, told Auto Remarketing.

“The uncertainty of from 2023 to 2024 was the level of unpredictability,” he said. “The level of excitement going into 2025 is because we are able to forecast. People are really excited to invest in the auto space.”

His group sees mega dealers investing in many aspects of the retail auto industry besides just acquiring franchises, Cantin said.

“Buyers are saying ‘it’s time to take the money out of the bank and reinvest. We are going to grow our platform’,” Cantin said. “2025 is going to be a very healthy, explosive buy sell year.”

The publics are back but private buyers will drive the market

Part of that healthy market will be created by publicly owned groups, who will be back in the market in 2025.

In 2024, the publics for the most part stayed out of the buy sell market, choosing to use their money for stock buy backs. That will change in 2025.

“From the conversations we are having we expect publics to probably be more aggressive (in 2025) than they have been,” said Karolis. “But they will be selective, and they will be prudent in how they invest and ensure they understand the earnings stream and its sustainability.”

The Presidio Group expects private dealers to be the biggest driving force in the 2025 buy sell market, however.

“We talk with hundreds of private dealers and there are more buyers than there are deals,” said Karolis.

In 2025, that will remain true, he said. “There will be no real change in the type of buyers.”

Dave Cantin Group sees the publics and family-owned dealerships as ready to grow in 2025.

“The publics have been sitting back and getting previous acquisitions integrated,” said Cantin. “Family-owned dealerships sat back and either strategically made acquisitions that became available or got their houses in order” in 2024.

That has begun to change. “In the last 30 days we have been hearing both are ready to reinvest in the auto industry, everyone is ready to grow,” said Cantin.

Haig says smaller, privately owned dealership groups will be the most active class of buyers in 2025.

“Most will want to acquire brands in their existing areas,” he said.”

Some of those buyers will be backed by family office or private equity, said Haig.

Family office and private equity “have capital and teams dedicated to acquisitions,” he said. “That is their business model, and I think they will be active.”

Manufacturers are becoming more comfortable with private equity and family offices acquiring dealerships, said Cantin, because those investors are getting better at showing the manufacturers that they represent a good option.

“The PEs have started to understand and identify with what the OEs are looking for in a partner,” said Cantin. “What the OEs get from PE is the immediate influx of capital. A PE group or family office can excite an OEM with their vision of growth and capability of operating really quickly.”

Changing EV policy a plus

While the new administration is threatening tariffs that could add an estimated $2,100 to the price of every vehicle, the dealers Presidio talks with are not too worried about the potential tariffs.

“(Trump) is pro-business and seems to be supportive of the auto industry,” said Karolis. “Dealers we talk to don’t seem to be all that concerned about it. They are more concerned about the overall cycle we are in.”

The change in administration could mean new policies that support hybrids and plug-in hybrids rather than pure EVs, said Haig. And that would be good for dealers and thus for the buy sell market.

“I am optimistic that some of these value-destroying EV policies will be adjusted, and other policies will be encouraged, like hybrids and plug in hybrids,” he said. “I think it will be a positive change.”

A less restrictive EV policy will create a generation of dealers who understand the evolution of EVs and want to invest in the needed infrastructure and training, said Cantin.

“As long as it’s not forced down their throats and as long as it’s not heavily mandated, they’re all in,” he said.

That’s important for future dealership value because there is no denying EVs are coming, said Cantin.

“Look, (the electric vehicle) is great, it’s phenomenal,” he said. “Evolution is real. We have to let it happen. We have to evolve without forcing it.”