While there may be some potential headwinds in 2022, brokers for dealership mergers and acquisitions report the dealership buy-sell market remains red hot.

"Our book of business is at a robust pace, and so is the rest of the industry," said George Karolis, president of the Presidio Group. "I think we’re at record levels."

The question for buyers and sellers is how long the current, favorable environment can last, with demand outpacing supply, record average transaction prices for new and used vehicles, and pent-up demand for parts and service. Cuts in dealership head counts and marketing budgets also have contributed to record profitability.

At the same time, interest rates are low, and for publicly traded dealership groups share prices are high, and that makes it more affordable to purchase dealerships partly with shares of stock, said Brodie Cobb, founder and CEO of the Presidio Group.

"The one thing that is just unbelievable is how inexpensive capital is today, how inexpensive debt is," Cobb said. "And every time those stocks go up, it gets cheaper and cheaper."

Another dealership brokerage firm, Kerrigan Advisors, said the total number of completed dealership transactions in first-half 2021 was 144, an increase of 27% year over year, and on track to surpass the record of 289 buy-sells last year. For the 12 months ended June 30, the total number was 320, up 11%, the company reported.

"Today, we are tracking to hit another record," said Erin Kerrigan, founder and managing director of Kerrigan Advisors. In a webinar hosted by the American International Automobile Dealers Association., she predicted 2021 buy-sells will pass 350.

One of those potential headwinds mentioned earlier is that would-be buyers may balk at high prices for dealerships, to the extent that high prices are based on the record profits they’re raking in, in the current highly unusual circumstances.

Earl Hesterberg, president and CEO of Houston-based Group 1 Automotive, said during a conference call to announce second-quarter earnings that the acquisition market is "as frothy as it’s ever been."

Kerrigan predicts the "froth" Hesterberg describes will last at least well into 2022.

"Dealers do not believe their dealerships will fully return to the low margins" at pre-pandemic levels, she said — not even when supply eventually recovers and high demand subsides. "Yesterday’s valuations seem ludicrous with regard to today’s profits."