By Alysha Webb, Editor and Publisher
I lease my car (which is not a luxury car, by the way) and I own my home. I settled on those arrangements based on certain calculations, including wanting to conserve cash by leasing my car and wanting equity in my name by owning my home. Similar considerations are in play when dealers decide whether they want to buy or lease the land their store sits on.
Of course, the considerations can be quite different depending on the business structure. The publics might need to own the land in order to make their balance sheets look good to bankers. The head of a family-owned group in the Northwest prefers to own their land for the same reason: “You build equity. It is a way to get access to cash,” he said.
Others may see owning the land as a retirement plan. A CPA told me about a deal he just closed where the owner sold everything but the land to one of the publics. The former owner is leasing the land to the public for 20 years at $35,000a month. He’s set for life.
There can be advantages to leasing, however, as my conversation in this issue with Willie Beck, SVP at Capital Automotive Real Estate Services taught me. For one, it frees up cash, much as my decision to lease my car did for me. (Though admittedly I freed up a much smaller amount than the decision to sell land to CARS and lease it back would free up.)
The bottom line is, as with so many issued related to the dealership buy sell world, do not put off planning. You should start thinking now about what land ownership structure best meets your future needs.
