How to Take Advantage of Lower-Valued Dealerships for Strategic Estate Planning

The current market has created some unique planning opportunities for dealers. A number of OEMs are navigating slowing sales, EV uncertainty, and inconsistent inventory pipelines, which have pushed demand down in certain segments. Valuation firms are reflecting this in lower blue-sky multiples across several franchises. While this can be frustrating from an operational standpoint, it opens the door for owners to make smart estate planning moves while values are temporarily softer.

When dealership values dip, owners get a rare chance to transfer more equity while using less of their lifetime exemption. Because gift and estate taxes are based on fair market value at the time of transfer, lower valuations make your gifting dollars go further. If you’re planning to transition the business to the next generation, this can meaningfully reduce long-term tax exposure. At the same time, if you’re considering growth opportunities, depressed multiples can make certain acquisitions more approachable. It’s one of the few times when both gifting and expansion can work in your favor.

These benefits become even more pronounced when gifting minority, non-controlling interests. These transfers qualify for valuation discounts—like lack of control and lack of marketability—which further reduce the taxable value of the gift. Layer those discounts on top of already-lowered blue sky multiples, and the effective value of the transfer can drop significantly. This means more equity can move out of the estate today at a lower tax cost while keeping the business stable and positioned for future acquisitions if the right opportunity arises.

Several factors are driving today’s lower valuations. Some OEMs are dealing with slower EV rollouts, ongoing inventory inconsistencies, and tighter margins, especially on certain gasoline models. These issues make specific franchises less attractive in the short term, naturally keeping multiples contained. Supply chain bottlenecks, tariffs, and international uncertainty are also playing a role in suppressing valuations for certain manufacturers. Even if these challenges are temporary, valuation firms are reflecting the current market reality in their appraisals.

Broader economic conditions are also playing a major role. Higher interest rates impact dealers from both sides—the cost of floorplan lines is up, and consumers are facing higher financing costs, which slows the demand. OEM incentive changes are also affecting store profitability and buyer appetite. Taken together, these factors explain why multiples in certain categories have tightened and why this valuation window is so unusual.

With values  well below their pre-pandemic highs, now is an ideal time to act. Gifting minority interests to children or trusts at today’s reduced values allows more ownership to transfer under the same tax thresholds. Tools like Intentionally Defective Grantor Trusts (IDGTs) remain particularly effective, as all future appreciation grows outside the taxable estate. And again, as mentioned previously, the annual gift tax exclusion becomes more effective when values are lower, allowing you to transfer more units of ownership each year without using up your lifetime exemption.

And don’t forget – the current federal lifetime gift and estate tax exemption is $15 million per individual ($30 million for married couples). Current exemptions are the highest since federal estate taxes have been introduced, and represent a stellar opportunity to avoid unnecessary transfer taxes. The exemption is a hotly-debated topic among legislators in Washington – making it a top target for change if/when new tax law is later passed. And with a top tax rate of 40% upon transfer, acting late could cost owners significant portions of their estate if planning is delayed.

For dealers ready to move, the first step is engaging a valuation specialist who understands dealership blue sky metrics. From there, coordination between your CPA and estate attorney is key to aligning tax efficiency with long-term succession goals. Owners should also evaluate which entities make the most sense to gift—operating company, real estate, management company, or holding company—and stress-test cash flow to ensure equity tied to guarantees or floorplan won’t create issues. Don’t forget: OEM approval is often required once ownership thresholds are crossed, so getting ahead of those conversations can prevent delays.

In today’s environment, lower dealership valuations aren’t just a challenge—they’re an opportunity. Using this window to transfer ownership at reduced values, leveraging tools like IDGTs, and preparing for upcoming estate tax changes can create long-term savings and strengthen succession plans. Acting now allows families to take advantage of historically favorable conditions and position the next generation for future growth. Temporary market pressures can absolutely translate into lasting benefits when planning early and proactively.

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