Many dealerships regard the automotive service manager as an integral part of their business. This is why people turn to buy here pay here car lots and end up spending more money than they have to. You can get more car for less money if you simply know what to do. The problem is that many people, have no idea that there are better alternatives available to them.
This method is highly subjective as the capitalization rate is based upon the particular appraiser’s perception of the risk of the business; consequently, the lower the appraiser perceives the risk, the lower will be the capitalization rate and the higher will be the price he would expect a potential purchaser to pay for the business.
I have been consulting with dealers for nearly four decades and have participated in over 1,000 automotive transactions ranging from $100,000 to over $100,000,000 and have never seen the price of a dealership sale determined by any multiple of earnings unless and until all of the above factors have been considered and the buyer then decided he, she or it was willing to spend “x” times what the buyer thought the dealership would earn, in order to purchase the business opportunity.
While most dealer websites offer photos, a complete list of options, an available vehicle history report, and a promise that their used cars have been inspected and reconditioned by their service department, most consumers want to know their trade-in value based upon make, model, and miles.
Turn the page to find the “severe service” section and you will see severe service is the condition in which most drivers operate their cars; short trips to the grocery store or work, idling a long time at the drive-in window at the bank or the fast food restaurant, or dusty conditions (of course it’s dusty out there).