Dealership transactions are on track for a record year in 2025, fueled by robust buyer cash reserves, declining interest rates, and high demand in both luxury and ultra-luxury markets. On the latest episode of Driving Solutions, Erin Kerrigan, founder and managing director of Kerrigan Advisors, joins us to break down the company’s recent findings.
Kerrigan Advisors surpassed $10 billion in client proceeds from dealership sales over the past 11 years, highlighting its significant influence in the industry. While the firm expects continued momentum into 2026, financing is becoming more attractive as buyers seek regional dominance.
Manufacturers absorb tariff costs
OEM insights from Kerrigan’s latest blue sky report indicate that manufacturers expect to absorb most tariff-related costs, leaving dealers with only about 10% of the burden. That dynamic, paired with onshore production shifts, supports efficient operations and stabilizes margins for dealerships.
Notably, Kerrigan highlights that the South has spearheaded the wave of consolidation, accounting for 56% of buy-sell activity through the third quarter. Additionally, local market consolidation has become increasingly common, with 65% of transactions involving buyers who are already active in the market. This trend underscores the importance of tuck-in strategies and regional growth. Although California presents regulatory challenges, it remains a strategic market for high-volume, profitable stores, especially following the recent reversal of EV mandates.
Valuations on the rise
Moreover, dealership valuations have risen since 2024, though they remain below 2022 peaks. On average, valuations are 76% higher than pre-pandemic levels. Luxury brands such as Lexus and Toyota are reaching all-time highs, while some brands, including Nissan and Infiniti, lag behind. Operator skill now plays a larger role in profitability, with top-performing dealerships achieving 7% net-to-sales, while others achieve break-even results.
“Based on the closings we’ve had recently and what we’re expecting for the rest of the year, I think it’s going to be a record year for transactions and closings.”
The ultra-luxury segment is also seeing unprecedented activity, with between 15 and 20 stores expected to change hands in 2025, compared with just six in 2024. Buyers of these high-end brands, including Ferrari, Lamborghini, and Rolls-Royce, remain largely price-insensitive, sustaining strong market demand. Notably, Toyota’s entry into the ultra-luxury segment with its Century model accentuates the growing potential in this area.
Looking ahead
Dealers are motivated by a desire to consolidate market share, expand regional dominance, and increase revenue per rooftop. AI adoption is expected to further boost efficiency and profitability by enhancing sales throughput and reducing headcount costs, which average nearly $100,000 per employee.
Ultimately, Kerrigan notes that 2026 will likely see continued record-setting activity in dealership transactions. With cash-rich buyers, active consolidation, and growing luxury demand, the dealership industry enters 2026 poised for continued expansion.
