Do you want to sell your car dealership? Why now might be the best time

If you’re looking to buy or sell your dealership in today’s retail automotive market, what do you need to know? Today on Inside Automotive, we’re pleased to welcome back Alan Haig, President and Founder of Haig Partners, to share a preview of the Q1 Haig Report and discuss today’s buy-sell market.

The Haig Report tracks trends in automotive retail and how they affect dealership valuations. In the report for Q1, margins continued to increase for new vehicles, doubling what they were year-over-year. Used car profits are down slightly. F&I and fixed operations also increased. These factors lead to exceptional dealership values.

The prices for dealerships hit an all-time last quarter and don’t show any signs of slowing down. Strong dealer profits and robust buyer demand have pushed multiples and values to new heights. For families thinking about exiting the business, Haig says the rise in values gives them opportunities to exit earlier. Given the 8% inflation rate, the car business is a great industry to invest in right now if you have extra cash on hand. OEMs also keep pushing back their production timelines, and Haig believes that it will take around three and a half years to catch pent-up demand, meaning car dealers will likely stay very profitable.

However, the possibility of a recession looms amid other economic factors like interest rate hikes, rising gas prices, and Russia’s invasion of Ukraine. These economic factors usually drive the auto industry, but due to the semiconductor shortage and lack of production, Haig doesn’t think it will have a severe impact as we expect. In this case, the industry might skip the effects altogether. According to Haig, pent-up demand also drives a significant increase in fixed operations. Because consumers can’t find new vehicles to buy, they are hanging on to the cars they have for much longer.

Suppose you are interested in selling your dealership and want to maximize the value of their business. In that case, you need to take the time to put together a package of information that clearly defines what the investment opportunity is for the buyer. Doing this step will fetch a better price for your store. Recently, Haig Partners oversaw two transactions where the owners tried to sell their businesses independently and were not satisfied with their offers. In one case, an owner received an offer 30% higher after putting together a package with Haig Partners. The other one was 50% higher.

Other factors an advisor can help with are responding to due diligence questions, pushing back if a buyer is being unreasonable, and handling complex operational questions.

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