CLEVELAND -

Dealer groups are getting bigger. For example, just since the year began, AutoNation acquired stores in Nevada and Georgia, while Group 1 Automotive reached what it called an “amicable and mutually beneficial settlement agreement” to finalize a deal for a luxury dealership in Florida.

KeyBanc Capital Markets focused on three elements while explaining why mergers and acquisitions will continue and the industry will consolidate further. Analysts noted buyers are largely driven by their abundant liquidity positions, strong cash generation and low financing rates.

“Additionally, we believe supply of single franchises/stores and smaller groups for sale will continue to grow in coming years due largely to an increasingly difficult regulatory environment and a lack of succession plans,” KeyBanc said in a report highlighting its most recent dealer survey conducted in December.

The report went on to mention that the recent activity by companies such as AutoNation and Group 1 is just the beginning of what might develop down the road.

“Warren Buffet, who recently bought one of the 10 largest auto groups in the country, stated this was just an entry point, and he plans to build upon it. George Soros, another mega-size investor, is actively looking for an entry point into the dealership arena,” KeyBanc analysts said.

“The management of AutoNation, Penske Automotive, Group 1 Automotive, Asbury Automotive and Lithia continue to tell us they are actively looking for more stores to buy,” analysts went on to say.

And KeyBanc isn’t the only outlet that sees dealerships being bought and sold at a high rate. During his first conference call as Ally Financial’s chief executive officer, Jeffrey Brown touched on this industry segment when asked to survey the entire auto landscape.

“Dealer health is great right now. You continue to see a lot of M&A activity among those dealers that are out there, both large deals and small deals,” Brown said. “We would expect that to that consolidation trend to continue.”

Having that activity “bodes well for us,” Brown continued. The new Ally boss emphasized how connected the company wants to be in the floor-planning sector not only for dealerships to secure inventory, but also for principals to expand their footprint.

“We play in that space. We help dealers acquire other dealers so that positions us well,” Brown said. “We feel pretty bullish that the industry is going to continue to grow.”

And part of that growth appears to be germinating in the used department.

KeyBanc’s report showed 71 percent of dealers survey think their used sales will rise; a portion saying the climb will approach 10 percent. Another 86 percent indicated that they expected F&I gross profit to improve by less than $50.

However, 43 percent of told KeyBanc that they expect the ongoing challenge of softening gross profit on used sales to continue, dipping by close to $50, while another 43 percent think grosses on used-vehicle turns will stay flat.