Industry Description
The Car Dealership industry, as defined by the U.S. Census Bureau, consists of companies primarily engaged in retailing new and used automobiles and light trucks, such as sport utility vehicles, and passenger and cargo vans, or retailing these new vehicles in combination with other activities, such as repair services, retailing used cars, and selling replacement parts and accessories. (NAICS 4411). The U.S. Census Bureau further sub-divides the industry into new car dealerships (NAICS 441110) and used car dealerships (NAICS 441120).
The following are some basic characteristics of the car dealership industry:
- Franchised light-vehicle dealerships had combined sales of roughly $1.3 trillion in 2025.
- Car dealerships continue to experience turnover, though the count has declined slightly: there were 16,990 franchised light-vehicle dealerships as of 2025. Industry-wide dealership counts have been roughly flat to slightly down over the past several years.
- Car dealership ownership remains highly fragmented: 93% of owners own 5 or fewer dealerships.
- Car dealership real estate (the land and facilities) are typically sold along with the car dealership business. Car dealership facilities are typically constructed for a specific use and are not readily adaptable to alternative uses. From a real estate perspective, car dealership facilities are considered special use property, which means that the real estate cannot typically be assigned other uses without substantial reconstruction costs.
- Dealership M&A activity is at a record high. Buy-sell transaction volume reached roughly 478 dealership transactions — the highest trailing-12-month total on record and about 114% above pre-pandemic norms, driven overwhelmingly by private/independent buyers rather than large public groups.
Industry Trends
The value of an auto dealership facility generally fluctuates with the strength of the auto sales market and interest rates.
Annual new-vehicle sales have not returned to the pre-pandemic trajectory. New light-vehicle sales are running at a seasonally adjusted annual rate of roughly 16.0–16.5 million units, still below the ~17 million the industry was approaching before the pandemic, and sales are expected to stay below 17 million for several more years due to affordability constraints.
The computer-chip shortage and broader supply-chain crunch that defined 2021–2022 have resolved; new-vehicle inventory has normalized. The dominant supply-side and demand-side pressures are:
- Affordability. Average new-vehicle monthly finance payments hit record highs (around $808–$813/month), and OEM incentive spending has risen sharply, ~13% year over year, to offset this. Buyers are increasingly extending loan terms to keep payments manageable.
- Tariffs. Tariffs on imported vehicles and auto parts (effective since late 2025) are affecting both pricing and year-over-year sales comparisons, since many buyers pulled purchases forward into early-to-mid 2025 ahead of the tariffs taking effect.
- Interest rates, which remain elevated and continue to weigh on affordability and dealer financing costs.
Total car dealership sales by segment:
- New car sales – 55%
- Used car sales – 35%
- Service & parts – 10%
Key Performance Metrics
In evaluating a car dealership, the following metrics can provide useful information in comparing a subject company to guideline companies and transactions: (unchanged — these remain standard industry metrics)
- Use-to-new retail volume ratio
- Immediate wholesale volume
- Wholesale loss/profit per vehicle
- Inventory turnover rate
- Reconditioning time (used cars)
- Gross Return on Investment
- Finance & insurance product penetration
- Per-vehicle-retailed gross
Industry Organizations & Publications
The following organizations publish useful information: (unchanged)
- National Automobile Dealers Association
- National Independent Automobile Dealers Association
- American International Automobile Dealers Association
Guideline Information: Private Purchase Transactions
Many car dealerships are privately owned. While there are publicly traded companies, data regarding the sale of 100% of closely-held car dealerships is generally the best source of information to appraise a subject company. However, because there are so many, the multiples are generally too variable to be meaningfully applied without further analysis.
The following are typical appraisal multiples from sale of car dealerships:
- Revenue multiples between 0.05 and 0.55 times
- Gross Profit multiples between 0.36 and 2.95 times
- EBITDA multiples between 1.6 and 14.7 times
In selecting guideline transactions, it is of critical importance to select transactions that are similar to the subject company. Unique factors for any subject company must be considered to yield credible results. Additionally, industry economic conditions also vary over time, which must also be considered — and given the record-high M&A volume noted above, current dealership buy-sell multiples may be running toward the higher end of, or above, this historical range in favorable segments.
Guideline Information: Publicly Traded Companies
Most car dealerships are closely-held (i.e., privately owned). However, there are several that are publicly traded, meaning it is possible to compare a subject company based on industry metrics and appraise using industry multiples. However, as with the guideline transactions described above, it is of critical importance to select publicly traded companies that are similar to the subject company. Also be aware that multiples of certain publicly traded companies may not accurately reflect a subject company. (unchanged)
The five largest publicly traded car dealership companies, ranked by market capitalization:
- Penske Automotive Group, Inc. (PAG) — approximately $14.3 billion
- CarMax, Inc. (KMX) — approximately $8.2 billion
- Lithia Motors, Inc. (LAD) — approximately $7.8 billion
- AutoNation, Inc. (AN) — approximately $6.9 billion
- Group 1 Automotive, Inc. (GPI) — approximately $3.5–4 billion
Note on volatility: these are point-in-time figures and have moved substantially.
The Price-to-Earnings ratios of these five companies range roughly from about 9 times to about 14 times earnings, with none currently showing a “not meaningful” net-loss result
Appraisal Rules of Thumb
Please note: you should never use a Rule of Thumb in place of a professional appraisal. You will never see a competent professional appraiser do their work using a Rule of Thumb. The professional standards that govern professional appraisal practice, which all professional appraisers should follow, specifically prohibit the use of Rules of Thumb.
Car dealerships are businesses sold based on sound economics. These economic considerations can be measured using the key performance indicators described above, but such economics cannot be accurately summarized in these simple formulae.