The auto dealership buy/sell market is continuing its record-breaking run in 2025, with 220 transactions completed in the first half of the year, and 454 in the trailing 12 months ending in June, according to Kerrigan Advisors’ Second Quarter 2025 Blue Sky Report.
The quarter’s strong industry earnings, the continued resilience of the dealership business model, and renewed activity from the elimination of the CARB mandate helped drive dealership buyer confidence and lift blue sky values to 75% above pre-pandemic averages, in spite of some market challenges and tariff policy uncertainty, which is reshaping consumer purchasing patterns.
“Dealership earnings’ growth in 2025 is giving dealership buyers the conviction to compete aggressively for high-quality franchises. The market is seeing more buyers than sellers, as it defies economic pressures from tariffs and buyers seek to deploy capital to expand their existing market share,” said Erin Kerrigan, founder and managing director of Kerrigan Advisors. “The industry’s improved profit outlook, coupled with abundant dealer liquidity and OEMs’ efforts to absorb tariff costs, is motivating buyers and sustaining competitive blue sky values in today’s active buy/sell market.”
According to the report, tariffs are prompting consumers to pull forward vehicle purchases and shifting demand toward domestics, which benefit from greater U.S. production and, likely, the Trump administration’s policies.
In contrast, many import brands faced supply constraints, higher costs and slower sales, though some OEMs absorbed a portion of tariff-related costs to help protect dealership profitability. These dynamics directly influenced Kerrigan Advisors’ adjustments to blue sky multiples and outlooks in the quarter’s report.
Meanwhile, industry earnings in the first half were more than twice pre-pandemic levels, supported by higher new vehicle sales, resilient vehicle gross margins, rebounding used vehicle prices and growth in fixed operations. Average public dealership earnings rose to $2.2 million, up 13% from the first half of 2024, while new sales increased 3.2% on robust consumer demand for pre-tariff vehicles, sustaining strong new vehicle gross profit margins.
Notably, the U.S. public dealer groups’ acquisition activity remains high in 2025, on pace for the second-best year since 2021, driven by several transactions including Sonic Automotive’s acquisition of US Auto Trust, and Asbury Automotive Group’s purchase of The Herb Chambers Cos. Public acquirers are well-capitalized with more than $8 billion in total capital and continue to leverage their scale to compete aggressively for high-value dealerships.
“While demand for top franchises remains intense, we expect tariffs and facility requirements to contribute to greater variation in valuations for the remainder of the year,” continued Kerrigan, who also expects buyers to be selective, targeting franchises with image compliant real estate, in high growth locations and representing OEMs who are willing and able to absorb a meaningful share of tariff costs.
Rising Blue Sky Values Reflect Supply-Demand Imbalance
The 2025 buy/sell market is seeing more buyers than sellers, especially in high-demand locations and for top franchises. Many owners are reluctant to sell based on 2024’s lower earnings, while buyers are eager to acquire ahead of projected profit growth. This supply-demand imbalance drove the Kerrigan Blue Sky Index up 2.9% in the second quarter of 2025 to 175, from 170 in the last two quarters. Average dealership values are now 75% above pre-pandemic levels, though still 17% below their 2022 peak, with performance varying widely by franchise.
Local Consolidation by Private Dealers Drives 2025 Buy/Sell Activity
While auto retail national consolidation remains a longer-term prospect, Kerrigan Advisors’ analysis confirms consolidation is advancing on the local level. This is particularly true in top markets and for leading franchises. Top brands are increasingly concentrated among a small number of dominant regional operators. For example, of the top 10 fastest growing U.S. metros, 57% of Toyota dealerships are owned by the largest consolidators, and, in Raleigh, NC, and Tampa, FL, all the Toyota dealerships are in the hands of Top 150 Dealership Groups.
This push for local expansion is driving a surge in tuck-in acquisitions, with an estimated 65% of buyers in the first half of the year expanding within their existing footprints.
Local and regional consolidation is laying the groundwork for future roll-ups, particularly in major metro areas. For example, the Washington-Baltimore metro has seen public ownership more than double, driven in large part by the sale of Kerrigan Advisors’ clients, including Koons Automotive (20 dealerships), Priority 1 (nine), RRR Automotive (five) and Sterling Motorcars (two).
Nullification of CARB EV Mandate Waiver Spurs Activity
The nullification of the CARB electric vehicle mandate is also having a positive impact on buy/sell activity in CARB states where, in the first half of 2025, they represented 34% of all dealership transactions, up from 23% in 2024 – a 48% increase in market share. This increased demand has eliminated the blue sky discounts recently applied to CARB state franchise, which has been replaced by heightened competition, particularly in high-density markets such as California and New England. Recent transactions, including US Auto Trust’s sale to Sonic in California on June 30 and the Herb Chambers sale to Asbury in Massachusetts on July 21, exemplify the renewed appetite.
“With the CARB EV mandate off the table, buyer interest in the 13 previously affected CARB states has shifted dramatically,” said Ryan Kerrigan, managing director of Kerrigan Advisors. “We’re seeing blue sky values improve and deal activity pick up in these markets, especially in high density metros. This momentum is likely to bring more sellers to market in these states in the coming quarters.”
Buyers Significantly Discount Franchises That Require New Facilities
Buyers are applying substantial discounts to blue sky values for franchises facing high-cost facility investments, particularly when projected returns are limited by constrained vehicle production as in the case of Porsche. OEM facility upgrade requirements remain a major factor in buy/sell negotiations where many buyers either avoid acquisitions where the dealership requires an image upgrade or are applying a significant discount to the blue sky multiple in compensation for the economic hazards associated with construction.
“Today’s economic uncertainty associated with the Trump administration’s current tariff policy, coupled with the existential threat of China’s global influence on the auto industry, is impacting buyers’ willingness to take on major long-term real estate projects in conjunction with dealership acquisitions,” said Ryan Kerrigan.
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