Survey: Optimism Soars Among Subaru, Toyota Dealers
The results of Kerrigan Advisors’ first annual dealer survey show Subaru and Toyota franchisees lead the industry in believing their dealerships will increase in value, outpacing all other brands — including highlines.
Forty-three percent of Subaru dealers told Kerrigan Advisors they expect their business to increase in value.
Photo courtesy Subaru of America Inc.
3 min to read
IRVINE, Calif. — Kerrigan Advisors released results from its first annual dealer survey, which was designed to gauge dealer sentiment about the future value of their businesses, as well as their perspective on franchise valuations.
The survey queried 650 franchised auto dealers and found that 86% expect their business’ value to increase or remain the same in the next 12 months. Specifically, 60% of respondents were confident in the stability of their current valuation, while 26% expected their valuation to increase, with only 14% anticipating a decrease.
Ad Loading...
“These results reflect the strength of the diversified auto retail business model and dealers’ confidence in their ability to remain profitable, despite declines in new vehicle sales,” said Erin Kerrigan, founder and managing director of Kerrigan Advisors. “This is consistent with Kerrigan Advisors’ most recent assessment of dealership valuations. In our second quarter 2019 Blue Sky Report, we noted that blue sky values rose slightly in the first half of the year after three years of declines.”
“Dealer optimism about their franchise values isn’t a surprise, not when Wall Street analysts see automotive as a hedge against a possible recession,” said Managing Director Ryan Kerrigan, noting that the Kerrigan Index, the firm’s index of the seven publicly traded auto retail stocks, is up an impressive 41% year-to-date through September, more than double the S&P 500’s 19% gain this year.
“While the news headlines tend to focus on the decline in new vehicle sales, investors are paying more attention to industry profitability, which is growing due to the higher margin parts of the auto retail business model, namely used vehicles and fixed operations,” he added. “Earnings growth is what drives valuations higher and that is what we are seeing in the market today.”
While the survey showed that dealers were notably optimistic about their own dealership values over the next 12 months, they also shared opinions about the direction of specific franchise values, pointing out potential winners as well as the franchises they felt would decline in value.
Ad Loading...
For example, Subaru had the highest percentage of dealers anticipating an increase in value at 43%, well ahead of second place Toyota, at 30%. There was also significant consensus among dealers about which brands were likely to decline in value over the next 12 months, with 65% pointing to Infiniti and Nissan, followed by Cadillac at 55%.
The survey also showed which franchises are expected to have the most stable valuations, namely Honda, Toyota, BMW, Lexus, and Mercedes — each of which typically listed among the most valuable franchises in the industry and are the most consistently profitable. Kerrigan analysts said this is primarily due to the stability of their dealer network, high sales per franchise, and the strength of their franchise business models.
How can auto dealerships help F&I managers fulfill their vital role in the most effective ways? Industry expert Rick McCormick shares his insights on the best ways to train these professionals and help them maintain good habits.
Some of it should be given to the customer, but that doesn’t mean the F&I office relinquishes the process. In fact, a different approach both builds trust and boosts sales.
Talk to F&I customers like you’d talk to a friend, without industry lingo or sales-like questions, and use hard proof to show, not tell, them about a need.
Helping F&I customers understand complementary offerings is likely to lead to more sales, based on the success of a high-performing practitioner of the philosophy.
In this video, Reese Dailey explains how effective follow-up drives better results
across the dealership, including increased sales, higher F&I penetration, and
stronger customer retention.
