Dealer Conversations

 

What dealers should watch for in 2021

Jan 26, 2021
By: Steve Hewitt
Dealerships

In December we heard from just about everyone that they couldn’t wait for 2020 to end. There’s no doubt that 2020 presented a firestorm of challenges, and back in March it’s safe to say that many didn’t expect dealerships to have a successful year. Yet by and large, most dealers have fared well in the wake of COVID-19.

As we anticipate what 2021 might look like, we ask the question: Can dealers expect to repeat 2020’s results?

We can’t predict the future or what challenges this new year might bring, but we can share some insights from conversations with our dealer clients. Here’s what we are hearing.

Will we see a drop in used vehicle sales? What will that do to prices?

When automakers halted new vehicle production to slow the spread of the pandemic, the resulting shortage of new vehicles caused an uptick in used vehicle sales and grosses. Many dealers are now finding themselves rebuilding used inventory — and with that comes the probability of prices dropping. With new inventory still lagging a bit, it’s possible that used sales won’t see a sharp decline but rather a slower drop off with declining grosses.

Are you changing ownership in 2021?

If you’re planning an ownership change in 2021, don’t let a PPP loan get in the way. Just know that you will need approval from the Small Business Administration before transferring ownership if the dealership has an outstanding PPP loan.

Changing tax rates and the impact on LIFO

With tax rates likely going up in future years, many dealers are weighing pros and cons of their last in, first out (LIFO) tax election. Each dealership is different, so consult your CPA to help you weigh the pros and cons of electing either on or off LIFO in the context of your overall tax situation.

Dealership buy-sells in 2021

We predict increased acquisition activity from the publicly owned dealership groups in 2021. These “publics” have had a big run up in their stock prices over the last three quarters; combine that with record low interest rates, and it’s a recipe for higher franchise prices and more transactions.

Share your thoughts

Regardless of what 2021 brings, you can count on Wipfli’s dealership practice to provide helpful information. We have professionals who can help you best position your dealership for success in 2021 and beyond.

We’d like to know what you think of the Dealer Conversations blog so far—– please feel free to share your thoughts in the comments below.

 

Related content:

Changes the Consolidated Appropriations Act of 2021 made to the Employee Retention Tax Credit

Provisions you may not know about in the Consolidated Appropriations Act

PPP and other SBA loan provisions in Consolidated Appropriations Act of 2021

Author(s)

Steve Hewitt, CPA
Dealerships Practice Leader
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