That new car dealership on the corner is looking better to investors than it has in years, as gas prices drop below $2 a gallon, and buyers buoyed by a stronger American economy search for new cars and trucks. Purchases of car dealerships rose by 40 percent in the past year, according to The Wall Street Journal. During that time, 456 dealerships found new owners, the Journal said.
December has been a particularly strong month for these sales and could push the total number of sales to nearly 500 by the end of the year. In just the first two weeks of the month, deals on 38 stores either closed or were announced, according to the report.
The surge in interest comes from both big and small entities, including investors, large nationwide auto groups and small-town single-lot owners looking to expand. Publicly traded dealers have accounted for 51 of the 2015 purchases to date, according to the online industry newsletter The Banks Report.
Billionaire investor Warren Buffett can claim partial credit for the run on dealerships because his 2014 purchase of a group of 75 dealerships jump-started investors’ interest in auto sales as a slow-growing and stable sector. Buffett’s deal marked the largest dealership acquisition in the industry’s history.
Lithia Motors, the nation’s seventh-largest automotive dealer, which is based in Medford, Oregon, announced its sixth dealership purchase for the year Tuesday, buying up a business run by Barton Auto Group in Spokane, Washington, that Lithia says will add $50 million to the company’s annual revenue next year.
The National Automobile Dealers Association predicts the auto industry will sell 17.6 million cars and trucks next year. If achieved, that figure would represent seven straight years of growth in U.S. auto sales and shatter a previous one-year record of 17.4 million set in 2000.
The recovery is overdue for many longtime auto dealers who watched sales drop to 10.4 million in 2009 and thousands of dealerships close throughout the U.S. Some of the ones who held on to their businesses throughout that period are now eager to cash in, the Journal notes.