Digital Dealer - January 2018 - 7

By RYAN KERRIGAN
Managing Director,
Kerrigan Advisors

// Ownership

Motion and
Commotion -
The Buy/Sell
Market
Intensifies
Buy/sell activity
continued its robust
pace through the first nine
months of 2017, tracking
towards the fourth
consecutive year of over
200 annual transactions.
While that indicates
continuity, we are
observing some significant changes in perspective that are stirring the
auto retail transaction
market.
I'll provide an overview
of two specific trends that
we see impacting the
current buy/sell market,
with implications for years
to come.

THE EVOLUTION
OF THE DEALERSHIP
BUSINESS MODEL
DRIVES MORE SELLERS
TO MARKET

Dealers are faced with
a more challenging retail
environment as sales
plateau, expenses rise
and new vehicle gross
margins decline. Average
dealership expenses

hit record levels for the
first half of 2017, as did
dealership employment
levels. Rising expenses
are driven by increasing
facility, administrative
and employment costs,

ultimately leading to lower
profits. (See Chart 1)
In this challenging retail
environment, dealers are
increasingly sensitive to
dramatic headlines calling
for the end of auto retail

as we know it. Comments
from industry luminaries,
such as Bob Lutz and
Dale Pollak, are certainly
alarming. Dealers without
a clear succession plan or
those who worry about the
next generation's ability to
navigate a more complex
retail environment are particularly concerned about
their businesses thriving
in the next chapter of auto
retail.
"For dealers, a realistic
view of what the world
will look like has got to be
part of the discussion...
the next several years
probably aren't going to
be comparable to the last
several. Back that with the
transformational stuff and
you could argue that a
Continued on pg. 8

CHART 1

2013
2014
2015
2016 2017	YTD
Average Dealership
SG&A
Expenses
84.4%
85.1%
85.6%
88.2%
87.8%
as a Percentage6.6%
of Gross
Profit
Versus
6.5%
6.4%
6.0%
5.7%
Average New Vehicle Gross Margins

2011
2012
SG&A	as	%	of	GP
82.4%
83.4%
New	Vehicle	Gross	Margins
7.3%
7.1%

2011 - 2017 YTD
88.2%

87.8%

18.0%

16.0%

85.1%

84.4%

85.6%

14.0%

12.0%

83.4%

10.0%

82.4%
7.3%

8.0%

7.1%

6.0%

6.6%

6.5%

6.4%

6.0%

5.7%

2016

2017 YTD

4.0%

2.0%

2011

2012

2013

2014

SG&A as % of GP

2015

New Vehicle Gross Margins

Source: NADA and Kerrigan Advisors Analysis

D I G I TA L D E A L E R . C O M

JANUARY 2018

7


http://www.DIGITALDEALER.COM

Table of Contents for the Digital Edition of Digital Dealer - January 2018

Digital Dealer - January 2018
Contents
The Art of Handling Mistakes
Motion and Commotion – The Buy/Sell Market Intensifies
You Don’t Have to Be Blood to Be Family in the Dealership
Shifting From Crisis to Opportunity
Warning! Your Customers Know More Than Your Salespeople. But Not for Long.
Advertising Your Tech-Spertise!
From the Show Director
Drawing the Curtain Back
Digital Dealer Workshops Chicago
Cover story
Interview with the 2018 Chairman of the Chicago Auto Show
Ready… Fire!...Then Aim
Turning Cash Buyers into Auto
Need a Tech – Keep a Tech or Other Staffer?
The New Car Buyers’ Clinic: A Case Study in How to Royally Mess It up!
The Pros and Cons of Building a Dealership Facebook Page
Is Your Dealership's Advertising Stuck in the '60s?
4 Ways to Sell More Cars in 2018
Digital Dealer - January 2018 - CT1
Digital Dealer - January 2018 - CT2
Digital Dealer - January 2018 - Digital Dealer - January 2018
Digital Dealer - January 2018 - Cover2
Digital Dealer - January 2018 - 1
Digital Dealer - January 2018 - Contents
Digital Dealer - January 2018 - 3
Digital Dealer - January 2018 - The Art of Handling Mistakes
Digital Dealer - January 2018 - 5
Digital Dealer - January 2018 - 6
Digital Dealer - January 2018 - Motion and Commotion – The Buy/Sell Market Intensifies
Digital Dealer - January 2018 - 8
Digital Dealer - January 2018 - 9
Digital Dealer - January 2018 - 10
Digital Dealer - January 2018 - 11
Digital Dealer - January 2018 - You Don’t Have to Be Blood to Be Family in the Dealership
Digital Dealer - January 2018 - 13
Digital Dealer - January 2018 - 14
Digital Dealer - January 2018 - Shifting From Crisis to Opportunity
Digital Dealer - January 2018 - 16
Digital Dealer - January 2018 - 17
Digital Dealer - January 2018 - Warning! Your Customers Know More Than Your Salespeople. But Not for Long.
Digital Dealer - January 2018 - 19
Digital Dealer - January 2018 - Advertising Your Tech-Spertise!
Digital Dealer - January 2018 - 21
Digital Dealer - January 2018 - From the Show Director
Digital Dealer - January 2018 - 23
Digital Dealer - January 2018 - 24
Digital Dealer - January 2018 - Drawing the Curtain Back
Digital Dealer - January 2018 - 26
Digital Dealer - January 2018 - Digital Dealer Workshops Chicago
Digital Dealer - January 2018 - Interview with the 2018 Chairman of the Chicago Auto Show
Digital Dealer - January 2018 - 29
Digital Dealer - January 2018 - 30
Digital Dealer - January 2018 - 31
Digital Dealer - January 2018 - 32
Digital Dealer - January 2018 - 33
Digital Dealer - January 2018 - Ready… Fire!...Then Aim
Digital Dealer - January 2018 - 35
Digital Dealer - January 2018 - Turning Cash Buyers into Auto
Digital Dealer - January 2018 - 37
Digital Dealer - January 2018 - Need a Tech – Keep a Tech or Other Staffer?
Digital Dealer - January 2018 - 39
Digital Dealer - January 2018 - 40
Digital Dealer - January 2018 - The New Car Buyers’ Clinic: A Case Study in How to Royally Mess It up!
Digital Dealer - January 2018 - 42
Digital Dealer - January 2018 - The Pros and Cons of Building a Dealership Facebook Page
Digital Dealer - January 2018 - 44
Digital Dealer - January 2018 - Is Your Dealership's Advertising Stuck in the '60s?
Digital Dealer - January 2018 - 46
Digital Dealer - January 2018 - 47
Digital Dealer - January 2018 - 4 Ways to Sell More Cars in 2018
Digital Dealer - January 2018 - Cover3
Digital Dealer - January 2018 - Cover4
http://www.nxtbook.com/nxtbooks/digitaldealer/dd26showdirectory_042019
http://www.nxtbook.com/nxtbooks/digitaldealer/201904
http://www.nxtbook.com/nxtbooks/digitaldealer/201903
http://www.nxtbook.com/nxtbooks/digitaldealer/201902
http://www.nxtbook.com/nxtbooks/digitaldealer/201901
http://www.nxtbook.com/nxtbooks/digitaldealer/201812
http://www.nxtbook.com/nxtbooks/digitaldealer/201811
http://www.nxtbook.com/nxtbooks/digitaldealer/201810
http://www.nxtbook.com/nxtbooks/digitaldealer/201809
http://www.nxtbook.com/nxtbooks/digitaldealer/201808
http://www.nxtbook.com/nxtbooks/digitaldealer/201807
http://www.nxtbook.com/nxtbooks/digitaldealer/201806
http://www.nxtbook.com/nxtbooks/digitaldealer/201805
http://www.nxtbook.com/nxtbooks/digitaldealer/201804
http://www.nxtbook.com/nxtbooks/digitaldealer/201803
http://www.nxtbook.com/nxtbooks/digitaldealer/201802
http://www.nxtbook.com/nxtbooks/digitaldealer/201801
http://www.nxtbook.com/nxtbooks/digitaldealer/201712
http://www.nxtbook.com/nxtbooks/digitaldealer/201711
http://www.nxtbook.com/nxtbooks/digitaldealer/201710
http://www.nxtbook.com/nxtbooks/digitaldealer/201709
http://www.nxtbook.com/nxtbooks/digitaldealer/201708
http://www.nxtbookMEDIA.com