Benefits of Selling Your Dealership Now Rather Than Later

08.07.21 03:26 PM By Carrie Forbes
6 factors that are effecting today's buy/sell market

None of us know for sure the trajectory of our industry and our country in this most unpredictable of times. Between political upheaval, catastrophic events, vehicle inventory shortages and economic instability, the current profitability of the auto industry may not be sustainable. 

 

Capital Gains and other taxes will surely increase. Selling right now provides a chance of beating out the tax man – if retroactivity proves too hard to implement.  If you are lucky or smart, by selling your dealership in 2021 you may reap capital gains at the 20% rate and avoid the proposed nearly 40% rate of future.  


Timing is always everything.  If you want to enter the race to close the sale of your dealership in 2021, remember that the average franchisor takes at least 120 days from date of submission to approve your Buyer.  That means if you don’t start now, you miss the opportunity to cash out in 2021 and possibly forfeit an additional 20% of the gain you earn on a sale. 


Dealership Values are higher than ever. Prices for dealerships have never been higher and that is not going to be sustainable.  Prices being paid for dealerships increased rapidly over the period of several months.  While they are still quite high, when they begin to fall the change will be rapid. 


Strong Qualified Buyers. Financially strong buyers are looking for good dealerships to acquire, however the list of those capable of purchasing at today’s high prices is short.  For any given dealership, there are only a few ideal candidates.  You need to be available when the right buyer wants you. 


Consolidation is eating up independent and small cluster dealerships at a rapid rate.  There comes a time when enough of the dealerships surrounding you may have been added to other groups, making your own inconsequential and far less valuable. 


Questionable Future. Rolling the dice on politics is a dangerous game.  No one expects a reversion to incentivizing businesses through lower taxes and less regulation in the current administration.  In fact the move towards socialism has been faster than any one, republican or democrat, could imagine.  The move away, when it comes, will be slow, arduous and painful -and may not come in your lifetime.

  

Our message is that if you believe selling now is the right step for you, acting at once is essential in order to have a chance of closing before year end.  Starting the process now just barely provides enough time to obtain a realistic evaluation of your dealership, prepare for sale, procure the right candidate and obtain franchisor approval. 


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