Dealers project cooling valuations headed into 2023…
November 14, 2022
According to a recent article by Automotive News, dealers across the country are becoming increasingly guarded about store valuations going forward (particularly for domestic OEM’s).
To be clear here, dealers are referring to the MVTAB, or “market value of the total assets of the business” (including real estate, blue sky, FF&E, inventory, etc). But for those of us that focus on the real estate aspect, we understand there’s often a fairly direct coorelation between the two.
So why are dealers nervous about 2023? Well, first off, high interest rates coupled with a recovering new vehicle inventory has resulted in used car values starting to collapse. So the days of dealerships selling used cars at sweet margins are probably gone. As well, the increase in new inventory is also driving new car prices back down to earth (and dealer margins along with them). Add to that dealers will once again begin to incur significant floor plan costs as new inventory levels are restored.
Bottom line, dealers are expecting this current period of heightened profitability to wind down. As profitability cools so too may underlying real estate values. #realestate #cre #dealership #value #valuation #appraisal