With valuations holding steady and consolidation accelerating, dealers are entering the second half of the year with cautious optimism. In today’s episode of Inside Automotive, Erin Kerrigan, managing director of Kerrigan Advisors, joins host Jim Fitzpatrick to discuss the trends driving the current buy-sell market.
Despite a pullback in new-vehicle sales, the buy-sell market remains active. May’s SAAR dropped to 15.6 million, down from stronger performances in March and April. June is also expected to soften. Kerrigan attributes the slowdown primarily to the consumer-side hesitation as affordability challenges persist.
Still, dealers remain optimistic. New-vehicle inventory declined 10% year-over-year in May, but the current days’ supply is hovering around 60 days—a healthy level by industry standards. Kerrigan notes that tighter inventory often results in more substantial margins as scarcity naturally boosts demand. Finished vehicle shipments also fell 9% year-over-year, primarily due to tariff-related disruptions.
Tariff impacts, while affecting inventory flow, have yet to influence dealership valuations. Kerrigan expected the situation to ease by the end of the summer, with OEMs likely absorbing more of the cost, as consumers cannot afford to take on additional pricing pressure.
The Kerrigan Index, which tracks public dealership group valuations, is up 4% year-to-date, reaching 918.91. That’s roughly double the rise of the S&P 500 this year. Public companies have seen strong gains, with Sonic Automotive up 21%, Penske Automotive up 11% and AutoNation up 8%.
Private valuations remain steady as well. The Kerrigan Blue Sky Index remains 70% above pre-pandemic levels and has held steady since the end of 2024. While individual franchises may see fluctuations, overall dealer profitability remains high.
"The microeconomic impact of each market is driving valuation a great deal. We're starting to get into this 'chess rather than checkers' market dynamic."
Consolidation remains a defining trend in the buy-sell market. Kerrigan Advisors reports that the top 150 dealership groups now average $2.7 billion in annual revenue—roughly 22 times more than their smaller counterparts—and account for a third of the industry’s market share. In major metros, standalone stores and small groups are becoming less common as strategic acquisitions accelerate.
Market dynamics are increasingly influencing franchise valuations. When a territory has only one unaligned store for a high-demand brand, its strategic value increases significantly.
Policy changes are also shaping buy-sell behavior. With the California Air Resources Board (CARB) waivers revoked, the 12 states that followed its stricter mandates are no longer bound by zero-emission targets that limited ICE vehicle sales. Under the mandates, OEMS faced caps on gas-vehicle sales, threatening dealer revenue in those states. Kerrigan’s firm had already observed hesitancy among buyers in those regions, who were uncertain about meeting the stringent EV volume requirements.
