I read two stories today about used car retailer Carvana. It offers a new business model for selling cars – online, with the option of either home delivery or pick up at one of Carvana’s huge car vending machines. Carvana is attracting a lot of investment but, much like online companies back in the dotcom bubble days, is also burning through that cash. Its revenue is growing, but so are its losses.
Online – and through a giant vending machine –is one of the new types of auto retail models that Brad Carter of Greystone Valuation Services says will begin to undermine the value of a dealership’s real estate. Since real estate makes up a big chunk of a dealership’s valuation, that should begin to erode dealership pricing in the future. This week we revisit my interview with him on that topic.
Dealership property is still increasing in value — for the time being. That has actually slowed acquisitions in some markets, James Taylor of The Presidio Group tells me. In those markets, the dealership property would be best used in some way than other than auto retail. Without a suitable location to relocate the dealership to, a sale can be difficult.
Also this week, the wisdom of carrying Directors and Officers insurance even if a dealership is privately-owned. Steven Gibson of Dealer Risk Services lays out some of the unpleasant results that can arise in a buy sell without D&O coverage.
We also have, natch, Transaction News.
Enjoy!
