Providing Accounting, Tax, and Business Advice for a Revitalized Car Dealership Industry



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Revitalized-Car-Dealership-Industry Since the Great Recession, the number of U.S. car dealerships has declined from over 32,000 dealers to approx 18,000 dealers. The remaining dealers are often part of multi-dealer organizations and typically much stronger financially than pre-recession. Since 2009, dealers have benefited from increasing sales resulting from an overall improved economy, lower gasoline prices, low cost financing, leasing programs, and auto technology improvements.   The following chart presents the growth of U.S. car sales from 2009 to 2014.



The attractiveness of the industry is evidenced by Warren Buffet’s recent purchase of Van Tuyl Group, the nation’s largest privately held dealership chain.  In fact, only four national dealers are larger than Van Tuyl including AutoNation Inc., Penske Automotive Group Inc., Group 1 Automotive Inc., and Sonic Automotive Inc.   A strong, sustained industry provides major opportunities for the advisor community.

Accounting Services

Larger, multi-brand dealers can benefit from continuous analytical review of individual brand performance. Individual brands require manufacturer-driven periodic capital expenditure upgrades and accountants can assist in cash flow planning and help obtain required financing.

Taxation

Dealers can benefit from a wide range of tax services, particularly with the need to regularly upgrade testing equipment related to the increasing amount of technology in today's cars.  Accordingly, dealers should take full benefit of capital expenditure tax expensing and bonus deprecation programs related to both equipment and software purchasing.

In recent years, the equipment expensing tax provisions and bonus deprecation provisions have been part of yearend tax extender packages. Tax advisors should meet with car dealers now and create an equipment purchase program that integrates the auto dealers’ business needs and the corresponding anticipated tax incentives.  

Dealers have large, lighting-related electricity costs related to both facility and outdoor lighting. Dealers should consider utilizing Section 179D lighting tax incentives for energy saving, long life, LED lighting upgrades.

Business Advice

Larger, multi-brand dealers require regular business advice including brand investment allocations, employee and management training, and succession planning.

Your local car dealer may be part of a larger and more sophisticated business than you may realize. Informed advisers can provide the level of services needed for this strong industry sector.

Article Citation List

   


Authors

Charles R Goulding Attorney/CPA, is the President of R&D Tax Savers.

Michael Wilshere is a Tax Analyst with R&D Tax Savers.