The blue sky has fallen a bit this year — but it’s still sky-high.

Haig Partners’ quarterly report on dealership buy-sell activity found values down by 12% from the end of 2022 — a product of declining dealership profits this year — but still at more than twice pre-pandemic levels.

Demand for dealerships also remains elevated. According to the Q3 2023 Haig Report, at least 385 rooftops were sold through the end of the third quarter, putting 2023 on pace to be the third most active year ever for dealership buy-sells, behind only 2021 and 2022.

The report said valuations are becoming more complicated because of “uncertainty about where future profits will settle.”

“The buy-sell market remains near record levels due to strong profits and significant demand from dealers who want to grow their companies,” Haig Partners president Alan Haig said. “We believe blue sky values will remain elevated since buyers believe profits will also remain elevated. There is pent-up demand for new units, and service drives remain full.”

While overall values are trending downward, the report noted blue sky values are very dependent on location and brand, with desirable franchises and attractive markets continuing to command premium prices.

As an example, Haig Partners pointed to Al Hendrickson Jr.’s sale of his South Florida Toyota dealership for the highest price ever paid for a single franchise. The buy-sell advisory firm said it has received “very desirable” offers for other Toyota stores in November, illustrating the continuing high demand for Toyota dealerships.

Demand for dealerships is also strong in fast-growing regions with “pro-business climates,” the report said, citing pending sales in Florida that Haig Partners said will set record-high values for their brands. Other geographic locations in high demand include Texas, the Southeast, Mid-Atlantic, Mountain States and the Southwest.

The report also found:

— Spending by publicly traded dealer groups on domestic dealership acquisitions plummeted 92% quarter-over-quarter, from $956 million in Q2 to $80 million in Q3, and total acquisition spending from those groups was down 78% from Q2. Haig Partners said it expects a spike in domestic spending late this year or in Q1 of 2024. For the year, public companies’ year-to-date acquisition spending was nearly $2 billion, up from the same period last year.

— Public group profits dropped 17% from the end of 2022 and are expected to fall by 20-30% by the end of 2023, but are still 2½ times higher than pre-COVID levels. Profits for the hottest brands, such as Toyota and Honda are holding up better than those at which days’ supply is highest, such as Stellantis.

— Fixed operations is a profit powerhouse, with gross profit climbing 9% year-over-year. With drivers expected to cover nearly the same number of miles this year as in 2019, the average vehicle now at a record 12.5 years old and consumers putting off purchases of new vehicles because of high prices and interest rates, service departments will remain busy.

— The long-term effects of the new Hyundai-Amazon partnership announcement are difficult to assess. For dealers, selling through Amazon provides an opportunity to reach customers who might otherwise buy from Tesla or other direct-to-consumer sellers, but the risk is that gross profits on new cars get pushed down significantly.

“There are several other factors supporting the buy-sell market today,” Alan Haig said. “We are past the UAW strike, which did not have a terrible effect on dealers. Inflation is declining, GDP is growing faster than expected, employment is rising steadily and a significant recession, which was predicted by many, if not most, economists, seems less likely with each month.

“Dealership buyers respond to these conditions with strong offers when the right dealerships come up for sale. For dealership sellers with realistic expectations, we are confident they can expect strong values for the balance of 2023 and into 2024.”

The full report can be downloaded at