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.
