4 Reasons to Schedule Your Dealership Evaluation Today

08.25.21 04:42 PM By Carrie Forbes

As markets continue to change and adjust with the latest economic factors, many dealers revisit their exit strategies. With increased taxes on the horizon, industry consolidation, questionable futures, and at the same time higher dealership values, it's easy to see why  owners are rethinking their long-term plans. 

The Seller's Market: How Long Will It Last? 

The benefits of selling your dealership now rather than later have never been so transparent. The prices of new cars and used cars have never been higher. With an average dealership net profit increasing around 40%, dealership values are setting records! Once auto prices stabilize, so will dealership values. What goes up must come down and 2021 is seeing an unprecedented seller's market for automotive dealerships. 

Pending Tax Changes

Biden's American Families Tax Plan could increase capital gains to an unprecedented rate of 39.6% and eliminate gains passed down to family members through estate planning. As a result, the top federal rate on capital gains could rise as high as 43.4% from the current 23.8%. Under Biden's tax plan, business income tax collections would increase to 3% of GDP in 2022 and rise to about 3.3% after 2025. Economists are warning this level of taxation has only been reached one other time in the last 40 years, from 2005 to 2007. Those dates correspond to the peak of the housing bubble, a troubling sign. 

The Microchip Shortage: Far From Over 

In a recent report from Auto Forecast Solutions, "global automakers have announced production cuts of 5.16 million vehicles from their production schedules and could lose a total 6.3 million because of the crisis." Nearly 20 auto factories have cut production back or paused it altogether over the parts shortage. According to the Washington Post - Ford, GM, Tesla, BMW and Daimler have reported continuing difficulties because of the microchip issue. 

The Decline of Future Earnings 

The employee shortage, impending inflation, market competition, and interest rates will all play a factor in the valuation of your dealership. With so many economic changes on the horizon, future growth earnings are sure to be affected. 

Average Franchisor Approval Time Frame 

The average franchisor takes about 120 days from the date of submission to approve your Buyer. The timeline begins after all the paperwork has been completed and submitted to your franchisor. If you have not determined the value of your dealership, you cannot sell it. If tax changes and market fluctuations concern you, then getting a dealership evaluation today can help you make the right choices to secure your future. 

If you are reconsidering your plans for dealer ownership next year, be sure that a dealership valuation is one of the first steps in your research. The value of your dealership will determine your timeline and, with the last months of 2021 right around the corner, time is running out. 

We can help you understand not only the value of your dealership, but your position as a taxable business under the current administration. With over 30 years of experience in every type of market - our evaluation and understanding of your situation will help you make informed and intelligent decisions for you and your family's future. 

Get started and request your dealership evaluation today!

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