"Follow the Money!" Profits Are Down 16%. The Buy-Sell Market Is Ripping. Here's Why & What Top Operators Know | Alan Haig, President at Haig Partners
Car Dealership Guy Podcast
"Follow the Money!" Profits Are Down 16%. The Buy-Sell Market Is Ripping. Here's Why & What Top Operators Know | Alan Haig, President at Haig PartnersCar Dealership Guy Podcast · Jun 18, 2026
Blue sky value is the "goodwill" part of a dealership’s price. It’s what you’re paying for the business’s reputation and customer pull, not just the building or cars.
Goodwill is the intangible value of a business. For a dealership, it’s things like reputation and customer relationships that make it worth more than just its physical stuff.
Fixed operations is the dealership’s more steady money-maker—typically service and parts. It helps keep the business profitable even when car sales slow down.
Day supply tells you how long the dealer’s current inventory would last if sales keep going at the same rate. If it goes up, it usually means cars are sitting longer.
M&A means mergers and acquisitions—when one business buys another or combines with it. The speaker is saying dealership deals are still happening because buyers believe the future will be good.
Operating metrics are the key numbers businesses watch to see if they’re doing better or worse. The speaker is asking whether the current drop is just temporary or part of a longer trend.
Auto retail is the part of the car business that sells cars to regular customers, usually through dealerships. The speaker says outside events can strongly affect how well dealerships do.
The Strait of Hormuz is a major shipping route for oil. If it’s disrupted, gas prices can rise, which can make it harder for car dealers to sell and profit.
Aluminum is a metal used to build parts for cars. If there isn’t enough of it, factories can’t make as many vehicles, which can leave dealers short on inventory.
The Ford F-150 is a popular pickup truck. The speaker is saying that if aluminum supplies are disrupted, fewer F-150s get built, which affects what dealers can sell.
This sounds like the automaker Stellantis. The host is saying some brands are doing better than others right now, and Stellantis is expected to improve.
It means the market is valuing dealerships less than it used to. Even if the business is similar, lower profits usually lead buyers to pay a smaller “multiplier” on earnings.
This is a way of saying how much buyers are paying compared to the dealership’s earnings. If earnings drop, buyers often pay less relative to those earnings.
“De minimis” means “so small it doesn’t really matter.” The host is saying that if earnings are extremely low, a normal earnings-based price wouldn’t make sense.
Infinity is being used as an example of a dealership brand that isn’t earning enough to support a strong valuation. If profits are tiny or negative, buyers don’t value the store the same way.
Lincoln is mentioned as a dealership brand whose stores aren’t valued strongly because profits aren’t there. When earnings are missing or losses exist, valuation tends to fall.
The Porsche 911 is Porsche’s famous sports car. The host is pointing out that there are more of them sitting for sale right now, even though the brand is still popular.
Buick and GMC are car brands under General Motors. The host is saying GMC’s trucks are different enough that GMC dealers can make more money on them than Chevrolet dealers can.
“Margins” here means how much profit the dealer makes on each sale. The host is saying GMC dealers make more profit on trucks than Chevrolet dealers do.
This phrase means engines that make a lot of power by burning fuel inside the engine. The speaker is saying some buyers don’t care as much about saving gas—they want strong acceleration and excitement.
Fuel economy is how far a car can go on a tank of gas. Here, the host is saying some buyers care more about power than about getting great gas mileage.
Vehicle quality is about how well the car is made and how dependable it feels in real life. The host is saying improving quality can help a brand sell more cars again.
The host is talking about Nissan and how it’s trying to sell more cars again. They mention Nissan is offering more hybrids and that its share of retail sales has been improving.
Market share means how much of the car-buying market a brand gets. Retail market share specifically refers to sales to regular customers, not business fleets.
Dealer profitability means whether car stores are making money. The host is saying the management team is focused on making sure dealers do well, not just selling cars on paper.
Toyota is a huge car company that sells a lot of cars worldwide. Here, it’s mentioned as the company that others wish they could compete with better in the US.
This means the car company sells cars straight to you, instead of going through local car dealers. The dealer may make less money or have less control when that happens.
“Dealer body” just means the group of car dealerships for a brand. The speaker is saying the automaker wants to work around those dealers if it sells directly.
Scout is being talked about as a car brand that would sell new vehicles straight to customers. The big idea is doing it without leaning on the traditional dealer system.
Rivian is a car company that sells directly to customers. Here it’s mentioned as another example of the direct sales model that relies less on traditional dealers.
NADA is an industry event where car dealers meet and talk with automakers/suppliers. The host is saying dealers left feeling like they didn’t get real answers.
This means the dealership’s repair/service shops that are actively working. The speaker is saying dealers can make money by doing more repairs and selling used cars.
Residual value is what the car is expected to be worth later (like at the end of a lease). If that number is better, leases can cost less and deals can look more attractive.
Experian Automotive makes software that helps car dealers check whether buyers and documents look real. The goal is to stop fraud while still making it easy for normal customers to buy cars.
Synthetic identity fraud is when someone creates a fake “person” using a mix of real and made-up details. Car dealers can get tricked into approving deals that shouldn’t be approved.
A trade-in scam is when someone tries to cheat the car deal using the trade-in vehicle. Since the trade-in price matters a lot, the dealer can lose money if it’s fraudulent.
Identity, income, trade, and ownership verification are automated checks used during the deal process to confirm who the buyer is, whether income claims are credible, and whether the trade vehicle is legitimately owned and properly documented. In dealership workflows, these checks reduce fraud risk and can prevent deal reversals or losses.
They mean how AI is starting to show up in more and more business tasks. Here, it’s about whether dealerships are using AI to make better decisions and sell more cars.
Concept
activate their internal systems
“Activate their internal systems” means turning existing dealership data and software into practical actions—like targeted marketing, improved workflows, or better customer outreach. The implication is that data alone isn’t valuable unless it’s operationalized inside the dealership.
P&L means profit and loss—basically whether the business made money. The speaker is saying all the tech should lead to better results, not just sound impressive.
The S&P 500 is a list of 500 big U.S. companies used to represent how the overall stock market is doing. If something changes in the S&P 500, it can be a sign of broader economic or business trends.
This is a simple productivity measure: how much business each salesperson brings in. If it doesn’t rise, then even with more tools or tech, dealers may not see much improvement in profits.
In this context, “legal documents” refers to the formal paperwork required to structure and finalize a dealership asset transaction. The host breaks out the timeline: offer materials, going to market, signing, then about a month for legal documentation.
OE approval is the automaker’s sign-off on a dealership ownership change. Even after paperwork is started, it can take a while—sometimes months—before the automaker approves it.
Divestitures mean selling parts of the business. Here, it likely means selling dealerships that aren’t making money so the operator can put that money into better locations.
A franchise here means a dealership’s permission to sell a specific brand’s cars and do service for that brand. Some franchises can be profitable, and others can lose money.
A core market is the main area where a dealership group is focused and usually does best. The idea is they’re selling off less-ideal locations and putting money back into the areas they know.
Hyundai makes cars, and the speaker says the cars themselves are good. But they’re saying the dealership business around Hyundai is getting harder right now.
Facility requirements are the minimum building and service setup a dealership must have for a brand. If sales volume is too low, those fixed costs can make the dealership hard to keep profitable.
Leasing support means the car brand helps dealers promote and structure lease deals. That can make it easier for customers to say yes to a lease, which helps sales volume.
Marketing support is help from the car brand to promote the cars—like advertising money or campaigns. It can make it easier for dealers to attract customers.
The Mercedes GLE is a popular luxury SUV. The host is saying it’s one of the models Mercedes expects to sell a lot of, so it helps drive the company’s sales.
The Mercedes GLC is a smaller luxury SUV in the Mercedes lineup. The host is saying it’s planned for the next model year as part of Mercedes’ upcoming releases.
Because EVs don’t naturally make engine sounds, some cars add fake engine noise. It’s meant to make the driving feel more familiar to people used to gas cars.
The Porsche Taycan is an electric car made by Porsche. It uses batteries and an electric motor instead of a gas engine, and it’s designed to drive fast and feel sporty. It’s mentioned a lot because it was one of Porsche’s early big EV releases.
A turbocharger is a device on gas engines that helps the engine make more power by forcing extra air in. The host is saying the word “turbo” doesn’t literally apply to an EV, but it’s still used because it sells.
“Direct-to-consumer” means selling cars straight to customers without the usual dealer middleman. The host is saying this could hurt traditional dealerships financially.
Carvana is a company that sells cars directly to customers, often online, instead of relying on traditional dealerships. The host brings it up as an example of how these newer models are getting involved in the auto business.
Slate is described as a company trying to become a car manufacturer (an OEM). The point is that new players are getting involved in ways that could change how dealerships make money.
The host is talking about how competition from Chinese EVs could change the car market. They’re wondering whether dealerships are already accounting for that risk when they buy businesses.
Sales margin is how much money a business keeps from each car sale after paying the costs tied to that sale. If the margin is small, losing sales volume can hurt a lot.
An export-driven model means the industry is making cars mainly to sell in other countries, not just at home. That can create extra competition for automakers and dealers in those target markets.
Here, “national security threat” means the concern that cars could be used to spy or cause harm in ways that affect a country. The speaker points to in-car microphones and possible listening/reporting.
Many cars have microphones so you can talk to the infotainment system or make calls hands-free. The worry mentioned is that those microphones could potentially be used to listen and send information elsewhere.
A supply chain is the whole process of getting materials and parts to build products. If that system gets disrupted, it can cause problems not just for car dealers, but for many other industries too.
“Ripple effects” means one problem can spread and cause other problems farther away. The host is saying supply-chain disruption could hurt more than just car sales.
“Scrutiny” means being closely checked. The host is saying regulators would look harder at these vehicles, which could make them more expensive to bring in.
“Oversight” means someone watching and making sure rules are followed. The host is saying the U.S. would manage imports more tightly, which could affect pricing.
General Motors is a major U.S. car maker. They’re mentioned to support the idea that the U.S. builds many cars at home, which can limit the effect of cheaper imports.
“Industrial base” means how much a country can make things—like factories and suppliers. The host is saying the U.S. has a lot of car-making ability, so cheap imports may not hit prices as hard.
FNI is the money a car dealer makes from arranging loans and selling insurance, not from selling the car itself. If cars cost more, dealers often sell more financing and insurance, so this profit line usually grows.
“Fixed ops” means the dealership’s service and parts business—like repairs, maintenance, and selling parts. It tends to be steadier than selling new cars.
Term
valuation multiple
A valuation multiple is a way investors price a business—like paying “a certain number of times” its earnings. If the multiple goes up, it usually means the buyer expects better results.
Reinsurance is insurance for insurance. Here, it’s being used to explain how dealers can earn extra money from warranty/insurance structures—not just from selling cars.
LIVE
Average dealership blue sky values are down to their lowest values since 2021.
Of course, blue sky value is the goodwill component of a dealership.
So that must mean that the auto retail market is in turmoil.
But that's actually not at all what's happening because we're seeing dealership buy sells
the acquisition of dealerships actually accelerate.
Alan Hague, welcome back to the Cardio from Guy podcast to help us make sense of all this.
Alan, how's it going?
Everything is going well.
You see, thanks for having me back.
Let's just get right into it.
You are always giving us the insider perspective into what is going on with the buy some market
and really the industry at large.
What's your take on the current health of the auto retail market and the buy some market specifically?
Well, the first quarter was pretty negative and almost every metric that dealers care about,
you know, sales were down, gross profits per unit were down, the used business is still
very tough.
The margins of dealers are making are the same in terms of dollar values we had six years ago.
So margins there are challenging fixed operations, which has been a very consistent source of
increased profits for dealers increased just 3% last quarter.
That's about the same rate as inflation.
So we're not really gaining there.
Day supply is going up, which is maybe a bit of a challenge right now because if our sales
are going down or day supply are going up, that means aging inventory.
So you might look around and say like, gee, this is a tough times.
And we do hear dealers, you know, saying that the conditions are significantly worse in
some cases back to pre COVID levels.
The bottom line is profits are still much higher than they were pre COVID.
And because of those high profits, we're seeing a lot of M&A activity.
The number of dealerships that sold in the first quarter of 2026 was up 39% from the
dealerships that sold in the first quarter of last year.
And we say to ourselves, you know, why is there this kind of boom in M&A?
And I think we're seeing two things.
One is the first quarter of last year was particularly weak because it was the dealerships
that sold in the first quarter were probably signed up in the fourth quarter of 2024.
And that was when we were having an election.
So people didn't know what's my tax situation going to be if I sell, if you're a buyer,
what's my regulatory environment going to be like?
So when people don't know what's going to happen, they do nothing.
And so we saw a big decline in M&A in the first quarter last year.
Now we're seeing a big spike.
And I think that the reality is that the conditions are still very good today because
dealers have been making so much money, even if profits are coming down, which is what
I think many dealers had expected.
They've got so much capital on their balance sheets that to them, if they're going to continue
in this business, they want to invest that money and try to get a better return than
they can get by putting it in the stock market or by buying commercial real estate or storage
units or the other kind of places that we see our dealer friends invest their capital.
So auto retail is declining.
Profits were down 16 percent in the first quarter.
It was pretty negative.
But M&A is still rocking because dealers have confidence that the future is going to be good.
Not as good as during the COVID era, but still very attractive place for them to invest their
capital.
When you're looking at your current deals in market and you're valuing different businesses
here, are your buyers or sellers, are they viewing this decline in operating metrics as a secular
decline?
Do we expect this to continue, whether it be gross profits or whatever metric you want to look at,
do we expect it to continue declining?
What's the real money in the market right now?
What is it expecting in terms of operating metrics as we look out 6, 12, 18 months down the road?
I think to predict profits, you'd think you could take some macroeconomic data and make an
accurate prediction, but one thing I've learned over the last 56 years is it is damn hard to
predict next month's profits.
How are we going to predict the rest of the year or in the future?
There's so much in our world right now that's impacting auto retail that's external to our
business.
It's gas prices because of the closing of the Strait of Hormuz.
It's a lack of aluminum to make F-150s because there was a fire at the plant.
You have these brands that are performing at very widely different levels now where you have
Toyota and Lexus that are just continuing to go on this strong role they've been on.
You have other brands like Stellanus, which is now going to be coming back in our opinion,
and Nissan that's showing some correction.
We see a wide variation in buyer performance or buyer attitude based upon the franchises.
Just an overall market, I gave you some of the stats.
The number of dealerships sold were up 39%.
You mentioned Blue Sky is down a bit from the end of 2025.
That is to me because those profits have come down, so there's less to buy.
But in terms of the outlook for the rest of the year, the consensus that dealers have is that it's
going to be pretty good, otherwise it wouldn't be investing all this capital.
You mentioned that to you, the 4% decline in Blue Sky is driven by profits being down.
Makes sense.
Are you seeing any multiple compression though?
Meaning we know profits are coming down that's going to drive the value of the goodwill when
I sell my asset, but is the multiple and that specific asset and amongst any specific brands
taking a significant decline here that's contributing to this drop in overall Blue Sky?
Not really, Yossi.
The multiples that we published in our Q1 report, we put it out a couple weeks ago,
if hopefully folks have had a chance to take a look at it and not take a contact to us.
The multiples really didn't change much.
We took Volkswagen down from trading at a multiple of three to four times earnings to just
a dollar value because I think their earnings have fallen so low at Volkswagen stores,
unfortunately, that if somebody is buying a Volkswagen store,
they're not paying three to four times their earnings because that would be a
de minimis amount.
They're really paying a dollar value.
That's the same way that we have some franchises like Infinity and Lincoln
valued.
They're the weakest ones in the end.
They're not trading on earnings as there in some cases are none or their losses.
But the other brands, we didn't see much change in the desirability from the last quarter.
The Rockstars are still at the top.
Lexus, Toyota, Mercedes, BMW, Porsche, is still performing even though they've got some real
product issues because they were geared up for EVEs.
And that's not where our economy or markets headed anymore.
So they've got a lull in products, but they've also had more 911s for sale than ever.
So many dealers are doing just fine.
So we haven't really seen a decline in any of the desirability of these franchises other
than perhaps Volkswagen.
In fact, we upgraded Buick GMC in this last quarter a little bit to make it comparable with Chevrolet
for as long as I've been in the business, GMC has been sort of a secondary brand of Chevrolet.
But they've created enough differentiation in the GMC trucks
that the margins that GMC dealers are getting on their trucks are higher
than what Chevrolet dealers are getting on their trucks.
So we've seen that brand become a little bit elevated.
Again, it's a little bit of an inch franchise compared to Chevrolet.
But we're not seeing many brands declining.
We're seeing most people staying steady.
From the weak brands that you mentioned, is there any promising brand out there?
Where could there be?
I know some people that bought Nissan's a couple of years ago that feel like the company is
on the verge of turning a corner and they made a good investment.
We'll see if they'll be vindicated, but I hope they will be.
But when you talk about these weak brands, you mentioned VW, Infiniti,
are there, is there any of these weak brands where you say, hey,
this is where I'm seeing the best potential value for a turnaround?
Or this is where there's disproportionate buyer interest nowadays?
I say that Stellanus is the brand that suffered so much.
I think there were, I can't remember how many straight quarters of sales declines at Stellanus.
And a lot of our friends who were making strong profits just saw them evaporate.
And they were so frustrated with the management there.
That's changed significantly. There are a lot of good new products coming out for
Stellanus brands that are focused on high horsepower internal combustion engines.
So they're going to go back to where they were four or five years ago in terms of focusing on
that type of customer who doesn't give a lot of, they don't care much about fuel economy.
They want a big engine that's going to go fast and make a lot of noise and carry them.
And their families and their work gear to where they need to go.
So I saw automotive news did a big highlight on Stellanus a couple of weeks ago and talked about,
I think, 60 new products that are coming. That's kind of astounding.
And they also talked about a focus on higher quality, vehicle quality.
And that's been a focus for Stellanus for decades.
They've never been at the top of the range, but they've got nowhere to go to up because
they're at the bottom. So if they can bring out new products that are better designed
and more reliable for the customers, then I really believe they will regain some of the
share that they lost. Nissan is also working hard to convince its dealers and consumers that
it's returning back towards where it was. Their market share did go up.
The retail market share did go up recently. They are bringing to market products that are in
demand, more hybrids, et cetera. I think the quality there is good.
The management team is focused on dealer profitability, which is what we care about
for our clients. So I'd say those two brands are the ones that are most obvious buys for
people today if you believe in the future there. Volkswagen and I, it's unbelievable to me.
That's been one of the largest global brands for decades and they've never really
got it in the US market. They never really brought the products to take the market share that they
should have to compete with Toyota. And now we see them almost giving up, almost in their dealer
body and saying, well, we're just going to invest in Scout, come up with a new product and sell it
directly to the consumer and not involve our dealer body that's been suffering for decades.
And when we're not doing that, we're going to invest in Rivian, which is another direct
consumer model, and give them our capital to help them develop and sell products directly to
consumers. So there was a terrible dealer meeting at Las Vegas early this year at NADA.
Yeah. And I don't know if some of your other guests have discussed that. There was kind of
hush-hush and we're not going to reveal any confidential details, but a number of people
said that they've never been to a worse dealer supplier meeting and their decades of experience
that they just were no answers. There was no accountability. There was nothing really optimistic
for the dealer base and that's just a sad fact. So Volkswagen, Audi, Porsche, they're all part of
the same family and they're all experiencing some struggles right now. What are dealers or VW
dealers telling you? Are they holding on, hoping for the best? Are they at the breaking point where
they're looking to sell? All of the above? What are you hearing? Well, some folks are selling
because they're at retirement age and they're going to sell for whatever they can. There are other
folks who say, I think it's going to get better. I don't want to sell at this low point. And if they
have other franchises, they can still live quite well on the profits coming from the other franchises
and they just reduce costs at their Volkswagen stores and they try to sell more used cars and
do a great job of service and service units in operation. Dealers are powerless to come up with
better product, powerless to come up with a better residual value for releasing. They're powerless
to run national ad campaigns. They really depend upon their supplier and they need a supplier that
cares about them, get frustrated and amazed and kind of angry at how poorly Volkswagen management
has treated its dealer body. And I think that there are upset, but there's not much you can really do.
So you focus on what you can and you put your best people and your attention and your better
franchises. And years ago, Mike Jackson, who was the CEO at AutoNation, had a phrase which I repeat
often, which is, you know, there's a battle for talent and capital auto retail and that capital
and talent is going to flow to where it can get the best return on investment. And right now,
it's not in Volkswagen. This episode is brought to you by Experian Automotive. Think fraud only
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click the link in the show notes below. Well, yeah, definitely not. So Alan, I want a bit of a different
topic here. I've had lots of conversations with dealers about their data and using it and activating
it within their dealerships. In other words, you're operating for decades or many years. You have all
this customer information. What can you do with it now in the age of AI to have it yield some return
to your dealership, whether a more efficient workflow, a more targeted advertising message to
your customer so that they're more likely to come in and actually purchase a vehicle, whatever it may
be. I am curious if you're seeing in this like crazy time of AI infiltration and tech any evolution
in the diligence of a dealership. I have to imagine the big groups who are most well-resourced
when it comes to this kind of stuff are probably putting a bit more weight on dealership data
and information, I don't know, cleanliness of it. Can they come in and activate their internal
systems and make the dealership more profitable in a much quicker way? How much is this whole tech
conversation entering the buy-sell market? Of course, at the end of the day, I have a buddy
that always says, at the end of the day, it's going to reflect in the P&L. All this fancy stuff,
is it going to reflect in the P&L or not? How much of this are you really seeing as part of the
diligence process amongst the big groups out there or buying stores? If you look at our industry as
part of global economy or even the U.S. economy, I listened to a podcast earlier this week,
the All-In podcast. I don't know if you've ever listened to that. It's clearly not as highly
rated as a car dealership podcast, but it is well followed. The guys there are all tech people,
and there was a lot of discussion about AI as an overblown, and what's the impact? Should it be
regulated? Should it be free? Somebody was saying that AI is driving the economy, and there was
another opinion saying, well, it's driving the economy in terms of blue collar manufacturing,
putting up these data centers. It's driving the economy for Nvidia. It's selling all these chips.
It's driving the economy for the energy companies that are selling electricity, these data centers,
but is it showing up in businesses? Are businesses more profitable because of AI?
There was one person who said that they had seen the operating margins of the S&P 500 go from
9.8 to 9.9, and they were saying that is a one-tenth of a percent, but it's essentially one-quarter,
and if that is sustained, and we're going to get another tenth of the next quarter,
another tenth of the next quarter, now you're talking about productivity going up
potentially 20, 30 percent pretty short order for the S&P 500, and it hasn't come from them
laying off a bunch of people. So if I look at the car business and I look at, are we seeing an
impact on the bottom line of AI, it's hard to see. I hear stories about people maybe they hire one
less salesperson because they have a better chatbot that's responding than their previous chatbots
were, but it's not obvious that it's shown up in better inventory ordering, but for years,
there's this belief that auto retail is kind of a two and a half percent net-to-sales business.
That's something that Daryl Kenningham talks about at group one, something that our friend Steve
talks about at automotive ventures, and if you could just change it to 2.7 percent or 2.8 percent,
we get a list of 10 percent in terms of profits. We haven't really seen that yet, Yossi, and so
I'm optimistic that we will because I think there is a lot of customers that would like to interact
in a more easily way to buy a car, and there are a lot of dealers that spend tons of money on
their tech stack, but haven't been able to increase the sales per salesman above 10 in 20 years,
or maybe 50 years. I don't even know if I'll back the data goes. So there's a lot of hope.
We're not seeing at this point you're saying. I think it's smoke. I haven't seen a lot of fire yet,
and I don't know if you've seen different. I see a lot of investment, even by dealers,
whether it be internally and building stuff that's tailored to them.
I want to see it reflecting the P&L just like you.
Tell me about, let's keep talking about the market, but tell us about your pipeline.
We had this conversation a couple of episodes ago, and it was very, very interesting.
What does your pipeline look like right now? It was the insider perspective of sentiment and
brand mixes and regions in the country, as much as you can.
We have, I would say, most active in California, Florida, and Texas. Those are the big states.
We've also been active in the Midwest, and recently less in the Northeast. It's still
early in the year, so I think things will level off. We constantly get calls from people saying,
I really want to buy an asset in South Florida. What do you have for sale? Could you help me buy
a Mercedes store in Texas? Something like that. There is still a lot of activity. We can see
how busy the year is going to be, because when we first meet with somebody, often we're explaining
what we do. If they're interested, we provide evaluation to them. If they want to move forward,
then we take several weeks to create the offer materials. Then we go to market. That takes
a couple of weeks. If we get a good offer, we sign it. It takes about a month to do the legal
documents, and then it's 90 days or more sometimes to get the OE approval. We can tell how active
the future is going to be based upon our activity six months before. It's a strong pipeline right
now, really all across the country, and almost all brands. Right now, we're representing
28 Mercedes stores in different parts of the US. Some of those, I don't know if they'll
reach the seller's expectations, so not all of them will sell. We have a closing coming up this
month. It's two Toyota stores and two Honda stores. We have a Lexus opportunity representing. We
haven't quite gotten to the seller's expectations. If you're going to give it up, you want to get
a great price for it. There's part of the market that will sell if they get the right price. They're
not necessarily retiring. Lexus or in general? Lexus, but in general, the top brands, people
are not trying. There's divestitures too. If you have a group of stores and you have a couple
franchises that are losing you money, there's the low end stuff that's going to sell for whatever
the market will buy it for. There's certain franchises people have given up or they have
franchises out of the market. There's some expansion that went on during COVID where people
were buying outside of their core market because there was nothing available in their market,
and now maybe there's some regret that they bought those stores because they have a harder time
running them. They're not performing the way they would like, so they're going to divest them,
take that capital and try and reinvest in their core markets. In terms of the pipeline,
it's really all brands, all franchises. We've got Nissan, we've got Ford, we've got Hyundai.
So nothing stands out to you disproportionately. You're seeing a balanced mix across the board.
Yeah, yeah. I would say everything is going pretty well. Hyundai's gotten a little bit tougher.
People always don't love the management there. The products are amazing.
We've reported on that. Yeah, and Porsche stores are going to go through a bit of a transition
where they won't have the volume in smaller stores that have facility requirements. They're
going to be challenged to pay for those requirements, but you have a challenge with Porsche today.
Mercedes, I believe, is on its way to coming back towards luxury or leadership in the luxury side.
I had the pleasure of meeting with Adam Chamberlain and Greg Gates from that company earlier this
week and was impressed with the confidence they have, the energy, and I don't want to say over
confidence because they know it's going to be hard work to take market share from brands like
BMW and Lexus that have excellent products and great customer loyalty, but they've got between
products that they're bringing in, leasing support, marketing support. They really believe
they're going to be able to get back to $400,000 a year, which is 4% per year gain in a market
that's flat to down. That's challenging. And how do they think they're going to get there?
Well, they'll tell you about their product plan. They've got a new GLE that's coming out this year
and a GLS. Those are two of their big volume drivers. They have a GLC coming out next year,
but they also have some challenges in their product pipeline and a lot of what they had
designed in Bill was EV. So I think their most recent product launch is a GT, which is a four-door
to stand, but it looks like a two-door coupe and it has something like 800 horsepower in it. The
thing is crazy fast. So it's an EV, but they listen to their customers who said, hey, we want to have
some noise and we want to feel the gear shift. So they fabricated the noise and the gear shift
to make it feel like an internal combustion car. Give the buyers what they want.
It's kind of funny. Like when I heard that the Taycan was coming out and they're going to call,
which is an EV, they're going to call their high end the turbo. I was like, this is ludicrous,
turbochargers taking exhaust gases from an internal combustion compressing and putting back on the
engine. But that brand meant something to the customers that they use that brand to help sell
Taycans. And I think the Mercedes plans on using noise and shifts motion to help sell their EVs.
So let's talk more about risk. Last time you were on, we were talking about
Senator Marino's bill, her legislation, you know, the block Chinese EVs. I said,
that's the simplistic way to put it. The only other, I wouldn't even call this notable, but
just data point I've seen when it comes to like exogenous threats since then would be
the potential for the rise of D to C players competing with traditional dealerships and
adversely impacting blue sky values. So I'll give you the most glitzy example that we reported on,
but Carvana received an option to invest or to buy shares in Slate, which is, of course,
a new OEM or attempting to be one and to sell these cheap new cars. All that to say that when
you look at China or D to C's, it makes you wonder, is any of this being priced in to
deals today? Or are dealers just not discounting for that whatsoever when they're making acquisitions,
assuming that Chinese EVs will not enter this market and just destroy dealership values completely
by, you know, hurting profits? How do you feel about the latest in the, you know, China EV scenario?
Well, I think first, every one on industry should be extremely grateful that Bernie Marino
exited the retail and motor business and is now dedicating his future towards public service
and that he is a very well spoken and an energetic advocate for our industry, not just
auto retailers, but also automakers. And I had the pleasure of hearing, he's talking to a reporter,
I was just kind of waiting for my chance to talk to him and he said that he wants a single mom in
Ohio be able to go and work at the Honda plant or somebody in Michigan or wherever, but he's an Ohio
senator, so he's talking about that plant and be able to make enough living to take care of her
family and their needs. And that can't happen if our auto industry remains as it is now,
which is doing a great job serving customers. I read a report recently that the penetration of
Chinese brands in Europe in the first quarter was 23%. So imagine every auto dealer in this country
if it lost 23% of their sales, which is what's happening to all of the dealerships in Europe.
The profits would be devastated and if the market share gains continue, many traditional
dealerships in Europe will go dark. It won't be able to cover their costs because we're talking
about a 2.5% that sales margin in the US is probably lower in Europe. So the threat is real
that the entrance of Chinese brands will harm automakers and auto retailers to a significant
degree. And as Senator Merino is saying in his bill, there's also a national security threat,
where the Chinese auto industry, it was financed to sell far more cars per year than what the
domestic Chinese consumer industry can accept. So it's an export driven model. And if you think
about the science fiction movies you watch on TV sometimes, the notion that somebody could take
over a vehicle and in a conflict use it to create harm, there's a chance that could happen.
Every vehicle today has got microphones in it. If the Chinese vehicles are being used by
citizens who have jobs that are of national security interest and they're being listened to
in their cars and that's being reported back to China, that could happen. Now I'm not a defense
expert, but I think that there is two interests that we have by the one is national security.
One is the health of an industry. But more than that, it's also a manufacturing base because all
of these auto drivers have a whole supply chain behind them. And those people are making products
and components, not just for auto retailers, but for other industries, defense industries, etc.
And if we have this massive devastation in our industrial base and our supply chain,
what ripple effects will that have throughout our economy? So I think that he is ahead of
most people in this country in terms of understanding the negative impact that
the importation and sale of Chinese vehicles could have on our national economy and our national
security. And so everybody who hasn't yet read that bill, everybody who hasn't yet started to
support Senator Merino financially, I think should consider that strongly.
As the market right now from your take perspective, pretty confident that he's going to successfully,
as he says, hermetically seal the country from these vehicles. Or are you seeing
anything happening in the actual market at this point?
I think that many dealers believe that Chinese vehicles will be here, but they're going to have
a challenge. They're just not going to come in like they can be in Europe. They're going to have to be
built in this country. They're going to have to have scrutiny. They're going to have to be
oversight, etc. So they won't have the same cost advantage that they have in other markets.
But that's what I hear from people. I think it's going to come,
but it won't be devastating like it is in other markets because we have such a big
manufacturing base here. If you look at, if you're in, I don't know, Poland, I don't think
they make many cars in Poland. So if they can bring in Chinese vehicles and lower the price
for the consumers, it's in their national interest to let those vehicles come in.
We're a little bit different here in the US because we have such a big industrial base,
not just with Ford, General Motors, you know, Stellanus, but with all the other
import brands that are making cars here, like in Tuscaloosa, all the SUVs from Mercedes.
So I don't see the pricing really being impacted by the threat. There have always been threats in
our industry. If I look back in my career, it was the public companies entering in the 90s.
You know, then it was the internet beginning of 2000s. We had so many of the last five years
direct to consumer, Uber, Tesla, and all these devastating, scary risks. One by one,
the industry just deals with it or they disappear. And so far, auto dealers look around. They're like,
well, my profits now are about double where they were pre COVID. You know, could they go back to
where they were? Could they be worse? Yeah. But where else can I invest the money that is immune
to risk? There's nowhere. The real estate market's been hammered. You know,
tech stocks are huge today. But if AI doesn't perform, what's going to happen to Nvidia?
You know, it's going to crater. So I think that there are certain dealers that do get
concerned about the risk and they just won't buy a store. They're just going to sit.
If I don't know what the future is going to be, I'm not going to make any big moves.
But there are enough who say, hey, I've dealt with all these other risks, I can deal with this,
and they're going to invest. So Alan, I want to transition to operating performance.
Last time you were on the podcast a couple of months back, I believe it was FNI that
hit an all-time record PVR based on public company earnings. How are you projecting this
right now in your deals, in your conversations? Do you see that continuing to rise? Have we reached
a ceiling? What's next when it comes to FNI? And of course, we can touch on fixed ops as well.
But those have been sort of the stable components of the dealership. Fixed
ops historically always has been, most recently, FNI has been up there as well.
So FNI tracks the value of the vehicle. And as vehicles have got more expensive,
you need more financing. You need more insurance. So that may level off because people are trying
to get the value per vehicle down. But the data is it's still going up. The cost per vehicle is
going up. And some of it is because the vehicles that consumers want are heavily contented large
vehicles. I mentioned before GMC that we raised our valuation multiple on GMC because there's
enough demand for those big, well-equipped luxury trucks that GMC dealers are doing great.
So I think FNI will just trend the value of the vehicle. What we see increasingly,
which is a little bit of a complexity in the buy-sell market, is that the reinsurance profits
that dealers are enjoying through FNI products are very significant compared to the total profits
they're making per store. So they often have an offshore dealer-owned warranty company where they're
making several 100000 perhaps a million dollars a year if it's a really good franchise,
like a high-volume Toyota store. And that's a big chunk of their profit. And the tax advantage of
those offshore warranty companies is very great. This tax is capital gains. You can borrow against
it versus ordinary income from the dealership profits. So I think that FNI, I don't worry
about things going to continue to track. The change in fixed operations in this quarter was so modest,
but I feel like this run we've had, customers couldn't buy a new vehicle, they would pay to
repair and maintain their older vehicle. And I think the average vehicle now is 13 years on our
road. It's never been as high. But the fact that we're not outpacing inflation, that gives me a
little cause for concern. Why is that? And we haven't yet dug into, has there been a decline
in recalls in the first quarter compared to the first quarter of last year? Because that drives
a lot of the fixed ops. So not yet sure if that's going to be a sustained trend where we're just
going to be flattening our service drives plus inflation. Or if we can regain where we're getting
5, 8, 11% gain quarter over quarter, that is really healthy for dealership profits.
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in the show notes below. You mentioned inflation, so we just ran our car dealership guy temp check
with our dealers in circles and the number one concern for dealers and there was about
close to 500 rooftops represented in this specific survey was affordability,
which as I mentioned on another podcast, I found it surprising just because it felt to me like
it's the broken record affordability. It's like you hear it all the time, but maybe there's more
tangible concerns that you can actually control. Nonetheless, it feels like we're in this K-shaped,
well, I would say it's pretty evident we're in a K-shaped economy when you look at how the stock
market is ripped and different market valuations and the middle class being slowly wiped out.
Are you seeing this also in auto retail, meaning are you seeing a conversation that's more centered
around luxury buyers continuing to buy versus other buyers just looking for affordable? Are we
getting to this territory where I call it the elimination of the messy middle? Is that the
market that we're in we're headed to? How do you think about that? Well, not a demographer,
but I have read a number of things about the destruction of middle class or the drinking
middle class. And when you dig into that, what does that mean? That almost sounds like people
are getting poorer. And the reality is that most people in middle class have gone up that the size
of the upper middle class has grown a lot. And we need a broad set of consumers that can buy
vehicles from us. But if you go to an Nissan lot, there are plenty of vehicles available for
$35,000. That's not what the consumer wants. That's why the consumer wants
as a loaded truck or SUV. That's what's selling greater numbers. But I mentioned I visited with
Mercedes and they have this road to $400,000 again. And they acknowledged that internally,
the previous management team, had focused too much on the high end. And they weren't producing
vehicles that were more affordable. So they want to be aspirational, but affordable before they
were just aspirational and unaffordable. It's kind of simplistic terms. So the factories are realizing
that there are people that would like to buy one of their vehicles, but they need to make it smaller,
decontented, simplify it, whatever they can to make it more affordable. So I think the factories
are reacting. And I can't imagine what it must be like to work in a manufacturer when
you wake up one day and President Trump has changed the tariffs on you. And maybe you're now at 25%
if you're in Mexico, but Korea is 15% or those kind of things. Like how do you figure out where
to invest and manufacture your parts or your finished goods? So that doesn't help with affordability
either. Now, the intention is there's more manufacturing that's onshore. And that's happening.
I think I read, I think it's Nissan, I think it was that they want to get 80% of their vehicles and
parts made in the U.S. So President Trump policies is having effect. It just takes a long time to
build a plant, hire people and change the supply chain. You can't do that overnight. The tariffs
have devastated some brands more than others. You know, Porsche is an example, they have zero U.S.
production, JLR is zero U.S. production. But the other brands, you know, Hyundai opened that plant
that I think it makes 350,000 cars a year. They opened that about two years ago, so their timing
was perfect. So I think big picture, this will settle out, you know, Adam Smith's land. You're
feeling good. You're feeling good, Alan. Yeah, I just, I look at the dealers we speak to and they're
all like, man, it's gotten harder to sell cars and the profits are coming down, et cetera. But
very few of them are saying, I'm how I'm going to go become a farmer. You know, there, most of them
would like to buy a franchise in their market if they can find one that they feel is a good value.
So as we wrap up, you know, last time you were on the podcast, you said this line, which I wrote
down, you said you were in a room full of industry leaders and you asked them, is this the worst,
or someone had asked, it wasn't you, but is this the worst of times or the best of times?
And at the time, it was, again, disproportionately best of times, I think with the exception of
one individual. And so I want to ask you that again now, and if you were in that room today,
it's been 334 months or so, would that it responds by those dealers be
any different than it was last time, still the best of times, or has anything changed in your opinion?
So I had a marketing professor a long time ago say, you know, you have to be careful of
polls, because or even consumer research, because people will say something, but not do something.
So what you really need to be careful of is versus revealed preferences. I love that one.
Oh, you know, their actual maybe I was the marketing professor. Well, it's the bit,
it's the number one thing, which is why I don't, you know, surveys are tricky because people don't
do what they say. And they, yeah, so I totally, totally subscribe to that.
So if I, if I ask myself, what are dealers actually doing? And I look at
the number of buy cells that's up 39% in a quarter. Now, again, I mentioned before
the first quarter last year was suppressed. But I think what we're seeing is that
there is a chunk of the dealers that say, Hey, this business is more capital intensive.
It's entering a new era of technology. My brand is suffering or my brand's on the top.
And for folks that are a little worried about the future, there are more stores coming to market.
That's how the volume goes up. But they're being met at the market with people with stacks of cash
that they made over the last 56 years who don't share of those concerns to the degree that
they want to get out. Instead, they're saying, you have a Toyota store, Lexa store, Mercedes store,
BMW, I'll take it, how much? Or they're saying 20 times, 20 times earnings, give me that Lexa
store. Yeah, I heard that. Or they're saying, Hey, Nissan, Infiniti, well, not Infiniti yet,
but Nissan, Stellanus, those brands got badly battered, but they're global brands, and they
will recover. And if I'm a value buyer, I'm putting my money on those brands to have a chance to have
a higher return on investment. I spoke to a friend of mine today that I met at AutoNation, gosh,
I mean, 30 years ago, and he's been in operations for a long time. He was with a group, he sold
his shares, now he's thinking about getting back in, and he was like, you think I should buy a store?
And I was like, well, let's look at the return on equity. Let's say there's a Kia store making
$3 million, and you can buy it for 12, 15 million, let's say 15 million, and you can
borrow half the money. So you have to come up with seven and a half and Blue Sky and other
$2 million in working capital for nine and a half. And after debt service,
that business is going to make you $2 million a year. So $2 million divided by nine, pretty good,
pretty good return on investment. I don't know that you can get that type of cash on cash return
in other industries. So that's what we see in the market. There are people that are constantly
coming and going, given their age, given their their fear, given their confidence.
But the bottom line is, you know, I've seen a really tough era. If I look back in my history,
the worst era I saw was in the financial crisis in 2009, I think, there were almost zero stores
that sold. I mean, today we're selling 700 a year. And that year we sold almost zero. Why?
Because if you had a good asset, you weren't going to sell it at a low point.
You know, and and people were saying, why would I buy a store? I got plenty of stores
that are underperforming. I gotta save my capital to get through this crisis.
We're so far from that right now. I mean, we're still in the best of times era to answer your
question that I think that when I see what people are actually doing, they're investing capital and
they want to grow up and down the quality stack from, you know, Lexus to to Nissan,
I think we're definitely in the best of times category.
Well, there you have it, folks. Follow the money. Words of wisdom from Alan Hague.
Alan, thanks as always for coming on the pod and sharing your your wisdom with the audience.
Alan Hague, Hague partners. Thank you so much. Pleasure being with you.
All right. I hope you enjoyed that episode. Please give the podcast a rating. Consider
subscribing to the show and check the show notes for links to the sponsors of today's episode.
Experian Automotive, Matador AI, and of course, Hague partners.
Thanks for tuning in and I'll see you guys next time.
About this episode
Dealership blue sky values are sliding—“Average dealership blue sky values are down to their lowest values since 2021”—but the auto retail market isn’t uniformly collapsing. Profits are down “16 percent,” yet buy-sell activity is surging: “The number of dealerships that sold in the first quarter of 2026 was up 39%.” Operators point to aging inventory signals, external margin shocks (gas and aluminum), and confidence in a better future. The conversation also covers valuation mechanics, brand strength, and how fraud and tech only matter if they show up in P&L.
Today I'm joined once again by Alan Haig, President at Haig Partners.
Dealer profits fell 16% in the first quarter of 2026, yet the number of dealerships changing hands surged 39% over the same period last year.
Alan breaks down the capital stockpile dealers built during the COVID era, why franchise values have held steady despite softer earnings, and which brands represent the best buying opportunities right now.
Topics:
00:20 Buy-Sells Boom As Values Drop.
01:45 The Profit Number Dealers Can't Hide.
05:35 39% More Stores Sold.
09:20 Two Beaten Brands Smart Money Buys.
11:35 VW's Disastrous Dealer Meeting.
14:10 Why AI Hasn't Made A Dime.
25:05 The Senator Blocking A 23% Crash.
42:10 The 20% Return Hooked Investors.
This episode is brought to you by:
1. Experian Automotive - Experian's Fraud Protect solution helps dealers identify potential fraud risks earlier in the sales process by leveraging advanced data, analytics, and identity verification tools. Visit @ here for more info.
2. Matador AI - Discover why the biggest dealership groups in America are using Matador AI to enhance their Sales and BDC teams to sell and service more cars than ever before. Head to @ here and book your demo today.
3. Haig Partners - The Haig Report® sets the standard for dealership M&A data and trends in auto retail. Read it @ here.
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