Car Dealership Business Valuation Benchmarks

Car dealership owners, business buyers, and industry investors rely on a diverse set of financial benchmarks to assess the value of a business. We have compiled data from current BizBuySell listings and sold businesses to provide insight into the business for sale market and important benchmarks for pricing and evaluating car dealership businesses relative to industry standards.

See also: Auto Repair Business Valuation

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Highlights of Car Dealerships Sold on BizBuySell

Car dealerships listed and sold on BizBuySell are comprised primarily of locally owned small businesses engaging in the sale of new and used automobiles. Most businesses sold are used/pre-owned dealerships, niche performance or classic car dealers, and less frequently, branded new car dealerships. Most of these businesses also offer repair and maintenance services, and/or auto parts sales as an additional revenue driving component.

Car Dealership Business Transaction Trends

The median sale price of car dealership businesses sold on BizBuySell has been very volatile as the industry reacted to unprecedented changes in consumer behavior during the Covid-19 pandemic. In 2020, many dealerships were struggling to remain liquid, and many distressed car dealer businesses sold, bringing prices down. Pent up demand for car purchases combined with low supply led to increases in new and used car values in 2021, and as such there was an abrupt improvement in car dealership sales, which brought valuations back up and beyond pre-pandemic levels. In 2024, prices have largely returned to pre-pandemic levels.

Car Dealership Business Valuation Multiples

Valuation, or pricing, multiples are financial tools that allow for comparisons between businesses that have different levels of revenue. They represent the sales price of a business relative to its financial performance, and given enough individual business sales data, they represent what the market is willing to pay for a business given its revenue and earnings.

Valuation Trends

Business values and associated multiples fluctuate over time, influenced by a variety of macroeconomic factors such as interest rates, inflation, consumer spending, and overall economic growth. For car dealership businesses reported sold on BizBuySell, the average valuation multiples had been increasing consistently since the height of the covid-19 pandemic. In 2024, valuations fell sharply as the dealer-favored market forces and financial performance largely came to an end.

Earnings Multiples

Earnings multiples represent the value of a business relative to its owner’s discretionary earnings or "cash flow". Arguably the most important valuation metric - as seller's discretionary earnings will often dictate how much a buyer is able to borrow to finance the business acquisition - most valuations will hinge on a reasonable earnings multiple.

Revenue Multiples

Revenue multiples represent the value of a business relative to its overall sales or revenue. In conjunction with an earnings analysis, revenue multiples are commonly used to value a business based on its top line performance.

How to Interpret These Multiples

Recent Listings vs. Sold Businesses

We calculate and provide valuation multiples from two sources: Current and recent listings of car dealerships for sale, and our database of "comparable" businesses sold on BizBuySell. Multiples based on listing data are usually higher due to owners setting asking prices above what their businesses might typically sell for. This occurs either intentionally as a negotiation strategy, or incidentally due to business owners’ common tendency to overvalue their own businesses. When asking multiples are lower than previous years' sales multiples, the implication is a recent decline in valuations.

Multiples based on comparable businesses - "comps" in business broker parlance - are much more useful as they represent the prices at which businesses ultimately get sold. Business brokers and valuation professionals will always turn to local comps when pricing businesses for sale or evaluating businesses for acquisition. We provide both sets of data at the national level to offer general context.

Quartiles, Median, and Average

No two businesses are identical, and as such, valuation multiples exist in a range. We have carved out four common values within this range: Lower quartile represents the value under which the lowest 25% of valuation multiples fell. Upper quartile represents the value above which the highest 25% of multiples fell. Median is the middle of the range, and average is the mean of the set. Mean is almost always higher than the median, driven by a minority of high volume, high value businesses sold at multiples above the upper quartile.

Businesses with consistent financial performance, above average revenue and earnings, demonstrable growth potential, low owner involvement, unique competitive advantages, and a seller willing to finance will command a multiple at or above the upper quartile. Businesses with below average sales, thin profit margins, full-time owner involvement, and many direct competitors will trade at or below the lower quartile. Most businesses will fall somewhere in the middle.

Based on this data, car dealership business values vary widely, with half selling for an amount between 1.6 to 4.1 times their annual seller discretionary earnings, 25% of well-managed, larger dealerships trading above this range, and 25% of smaller, less desirable dealerships trading below.

Financial Benchmarks

To determine how a business compares in terms of sales volume and financial performance relative to industry peers, it’s necessary to have some insight into industry standards. "Benchmarking" describes the practice of comparing a business’s financial performance to typical industry standards to determine where a business falls relative to other businesses in the same industry. These benchmarks can help guide owners and investors towards appropriate valuation multiples from the range above.

To that end, we have aggregated car dealership business financial ranges useful for comparing an individual business to the broader industry.

Car Dealership Revenue and Earnings Trends

The median discretionary earnings and revenue for car dealerships sold fell sharply in 2020 as consumers stayed home and car sales fell. Sales and earnings rebounded in 2021 and continued to grow through 2023, though profit margins were squeezed. In 2024, median revenue and earnings of car dealerships listed for sale largely returned to pre-pandemic levels.

Earnings Ranges

Discretionary earnings (used interchangeably with the terms "cash flow" and seller's discretionary earnings or SDE) is often the crux of business valuations, so it is important to benchmark it relative to similar businesses traded on the business for sale market. Below you will find discretionary earnings ranges for car dealership businesses sold over the past five years, as well as recent car dealership for sale listings.

Revenue Ranges

Revenue volume plays a large role in business valuation, as it measures the size of the potential income opportunity for new ownership. It's not uncommon for buyers to select an earnings multiple range based on overall revenue volume. The table below includes revenue ranges of car dealership businesses sold over the past five years and recent car dealerships listed for sale.

How Revenue and Earnings Level Affects Business Values

Clearly higher levels of earnings lead to higher valuations, even given the same multiple. However, valuation multiples also tend to rise with business sales volume. High volume car dealerships that generate higher sales (and maintain reasonable profit margins) tend to sell for earnings multiples on the higher end. So, a well-run car dealership generating over $8MM may sell for an earnings multiple of 4 or higher, where a smaller volume dealer with sales below $1MM may trade closer to 1.5 times its annual earnings. Real estate is also a consideration, and car dealership businesses that also own the real estate will trade at a higher rate than those that lease.

This tendency for higher sales volumes to fetch higher valuation multiples is largely driven by the economics of business acquisition financing. Businesses with greater revenue and earnings give buyers more cushion to cover debt service obligations and still have enough left over to pay the new owner a reasonable income.

Sector Comparisons

For a more complete understanding of the market and valuation standards, consider comparisons within the broader automotive sector when benchmarking car dealerships. The chart and table below includes key metrics from sales of automotive businesses on BizBuySell between 2020 and 2024.

Compared to other businesses in the automotive sector, car dealerships tend to fetch slightly lower earnings valuations relative to their revenue volumes. Additionally, there is a significant spread in valuation between individual dealerships which is driven largely by the businesses ability to drive sales volume while maintaining a reasonable profit margin. Car dealerships are complex businesses that require experience to operate successfully, and as such, the pool of buyers and investors is smaller than other, more simple business models. These factors tend to keep values in check.

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