Auto dealership transactions set a brisk pace in the first quarter as industry consolidation accelerated.

Sell-side firm Kerrigan Advisors’ Blue Sky Report shows buy-sell deals jumped 21% year-over-year in the quarter to total 114. On a trailing 12-month basis, transactions hit a record high of 478, or 114% beyond the prepandemic five-year average.

Much of the deal increase came in multistore transactions, according to Kerrigan, which noted a 36% jump in deals including more than one rooftop to 108 on a trailing 12-month basis.

Many auto retail families are taking advantage of elevated dealership valuations to sell, some also prompted by geopolitical unrest, consumer affordability pressures and increased regulation, Kerrigan said. It found some brands, including Toyota and its luxury line Lexus, hit record valuations in the quarter.

Some families also saw a recent drop in publicly traded franchise values as potentially signaling marketwide softening. Kerrigan’s own industry index fell 10% through May on the heels of the Middle East war and its affect on oil prices.

Meanwhile, the firm’s Blue Sky Index rose to 178 in the period, nearly 80% higher than prepandemic levels. It found that publicly traded auto groups’ average per-deal purchase price was up 253% year-over-year to almost $200 million.

Among the sky-high transaction costs was Penske’s $670 million buy of two Orlando, Fla., Lexus franchises, said Kerrigan, which put the transaction price as the highest ever paid for two stores.

“The publics continue to focus on acquiring the top franchises in major growth metros like Orlando and have demonstrated their willingness to pay a significant price premium when those finite assets become available for purchase,” Kerrigan said.

While the pace of buy-sells accelerated, average dealership profits declined in the quarter, the firm reported, down 15% to 20% year-over-year. Harsh winter weather and the absence of last year’s trade tariff-fueled consumer demand were at play, Kerrigan said.

Still, “dealership sales and earnings remain structurally above pre-pandemic levels due to sustained new vehicle gross margins, higher finance and insurance penetration, rising used vehicle sales and continuous growth in fixed operations. In fact, average dealership sales remained at record levels in the first quarter despite a 6% decline in new vehicle sales,” Kerrigan said.

Nevertheless, dealers are now relying on a smaller segment of consumers with the financial wherewithal to absorb inflation. 

“While only 16% of U.S. households earn more than $200,000 annually, this demographic now represents 29% of industry sales, up 61% since 2020,” the report said.

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