In the U.S., vehicles can be purchased from approximately 21,500 franchised dealers, more than 45,000 independent used vehicle dealers, or through person to person transactions. With annual estimated sales of $1.0 trillion, automotive retailing is the largest retail trade sector in the United States and comprises roughly 10% of the GDP.

Sales in the automotive sector are affected by general economic conditions including rates of employment, income growth, interest rates, and general consumer sentiment. Since 1990, new vehicle revenues have grown at a 5.3% compound annual rate and used vehicles at a 4.7% compound annual rate. New and used vehicle unit sales however, have increased at slower compound annual rates of 2.3% and 0.6%, respectively.

New vehicles account for an estimated 60% of industry revenues, but only 35% of gross profits. The remaining 40% of revenues are derived from used vehicles sales (26%), service and parts (10%) and finance and insurance (4%), which combine to contribute 65% of the auto dealer industry’s gross profits. New vehicles can be sold
only through automotive retail stores franchised by auto manufacturers. These franchise stores have designated trade territories which limits the number of new stores that can be opened in any given area.

Although significant consolidation has taken place, the industry today remains highly fragmented, with the largest 100 dealer groups generating less than 10% of total revenues and controlling less than 5% of all franchised dealerships.

A large percentage of auto dealer owners are reaching retirement age, many of whom have no clear succession plans. Larger, well-capitalized automotive retail operators provide a ready market for dealers seeking to sell their operations. American Automotive can provide the exit strategy for dealers seeking to sell their real estate.

The chart below illustrates the greater stability of U.S. auto dealer pretax profits over the past 20 years as compared to U.S. automaker pre-tax profits. Dealers are steady and consistent earners. Dealers therefore are less likely to miss rental payments on their real property. This is good for American Automotive as a buyer and for dealers which can expect higher pricing for their properties.

Comparative Pre-Tax Margins of U.S. Automakers vs. U.S. Auto Dealers
1982-2004

Source: National Automotive Dealers Association