November 10, 2025
By Barrie Charapp Beaty
Charapp & Weiss, LLP
bbeaty@cwattorneys.com
You have thought long and hard about it, and the succession plan for you and your family is to sell those very valuable assets, which is your dealerships. Your blood, sweat, and tears have paid off. In deciding to sell, there are various considerations that we highlight in this article, but by no means, is this article comprehensive of everything that should be considered.
What are you selling?
Are you a dealer with 1 or more stores and no longer want to be in the business so you are selling everything? You probably are looking at an asset sale and retiring. Do you have 5 stores and only want to get rid of 1 of the stores?
Some buyers are looking for non-competes in buy/sell transactions. If you are retiring, a non-compete may not give you heartburn, but if you are only selling one of your stores of the 5, a non-compete may not be possible for you to enter into.
If you own the real estate where the dealership operates, do you want to sell the land with the store or keep it for rental income monthly? Deciding what you want to sell and net out of the deal is very imperative to starting the selling process.
Ownership
- Corporate Documents: You need to have all of your corporate documents that pertain to each entity that owns the assets and real estate. Depending on the type of entity owning your dealership, which are typically corporations or limited liability companies, you should have your articles of incorporation or organization, bylaws or operating agreement, resolutions/minutes, and they should be up-to-date. If you are now the sole member of the LLC, the operating agreement should had been amended when you bought the former members out years ago.
- Authority to Sell: It’s imperative that it’s clear that the person marketing and selling his or her dealership has the authority to sell it. The decision maker should know that they have the right to enter into agreements and sell the dealership. You don’t want to get months into the process, with tons of attorney fees, and discover that you need the long lost relative’s estate to sign off on the deal.
- Family Relations: Dealerships have long served as the family business. It is what has made you pillars in the communities in which you operate. Are you thinking of selling or gifting to a child or a sibling? Franchise laws have long offered families protections should the family business continue upon the retirement or unfortunate passing of the dealer principal.
Is the Real Estate Owned or Leased?
Do you own the land where your dealership operates or are you on a lease?
- Leases. For dealerships that are on leases, you should know how long is left on your lease. Know your rent and the projected escalations of rent if that is included in the terms of your lease. Is there is a purchase option at the end of the lease term? Does your lease have a guaranty? When selling, you must consider a buyer that has the reputation and financial ability to convince your landlord to consent to an assignment and assumption of the lease and/or guaranty.
- Title Commitment. If you own the land and are thinking of selling, you should find your old title policy. Having that readily available for the buyer will help with the due diligence on the property. Knowing any exceptions on your property prior to getting the updated title commitment would give you a head start in knowing what may show up on the buyer’s commitment. Be prepared to remedy issues that may show up on the commitment such as an old deed of trust that may not have been removed from when refinanced your property 10 years ago. You will have to get that old deed of trust removed prior to closing.
- Environmental Studies. When was the last time you conducted an environmental survey? Did you have tanks removed 40 years ago? Do you get the oil water separator cleaned out every 6 months? Finding all of your environmental records for the property will make for smoother Phase I and Phase II investigations. Environmental inspections and investigations are one of the biggest concerns of buyers. Providing the buyer with all environmental information on the property will make the due diligence run more smoothly.
- Surveys. Do you have a recent survey that you can provide the buyer? Old surveys give the buyer a good perspective that the facility is not built over an easement or storm drain that could be a concern to them in the future. The buyer will have to get their own survey, but what is on it won’t be a surprise if you have provided an older one. It may also give you piece of mind that you won’t have issues that will have to be remedied prior to close.
Inventories
- Parts and Accessories. Most buy/sell transactions have a cap of which parts will be purchased. For OEM parts, buyers typically only want to buy what is in the current parts catalog. For non-OEM parts and supplies, its common to be purchased at the seller’s cost. All other parts are considered obsolete and won’t have a defined price in the deal. Whether you are thinking of selling or not, dealerships should be doing a parts inventory every year. It cleans up your books and the parts department. A parts inventory every year cuts down on the losses taken on obsolete parts.
- New Vehicle Inventories. Have you been getting your fair share of vehicle allocations from the manufacturer? If not, what have you been communicating to the manufacturer? Does the OEM have an improper PMA for you that is affecting your allocations and CSI? It is imperative that you have taken steps to protect your investment with the OEM. Your valuation will depend on it.
- Fixed Assets. Fixed assets include things such as fixtures, furniture, office equipment, mechanical and service equipment, and all other tangible personal property used at the dealership. Have you kept your FF&E up-to-date on the books and depreciated them yearly? If your FF&E has depreciated to essentially $0, buyers will often figure the FF&E into the goodwill price and put a value on it prior to closing. Sellers need to speak to their CPAs when putting a value on the FF&E out of the goodwill price because it can have certain tax implications (capital gains versus ordinary income). For those dealers that don’t have great records of their FF&E, you may want to consider getting an appraisal by an appraiser that specializes in automobile dealership assets in order to maximize the FF&E value.
Facility
Having the newest image program upgrades makes your dealership very attractive to buyers. Buy/sells often lead to the OEM leaning on the buyer to upgrade the facility. When was the last time you did a facility upgrade? Its imperative that you know the facility upgrade protections in your state. States like Virginia have 10-year protections which allow you to earn incentives tied to facility upgrades even if the factory changes the program within the 10 years that you last did an upgrade. Make sure you are getting the benefit of those facility upgrades that you paid for.
Knowing the state franchise act protections can be very valuable to buy/sells. Virginia buyers receive the benefit of the seller’s facility upgrades during buy/sells because the OEM cannot impose a condition on the buyer that it could not do on the seller. Therefore, if the facility was upgraded 4 years ago, but the OEM incentive program has changed, the buyer would still have a 6-year window to receive the new program incentives without the factory using the buy/sell to require the upgrade sooner than that 10-year mark.
For those dealers that have older facilities, the factory will use the buy/sell as an opportunity to want an upgrade from the buyer within a certain number of years after the closing. It may factor in the offer by the buyer.
Vendor contracts
When was the last time you did an inventory of all your vendor contracts? Whether you are thinking of selling or not, you should know the termination dates for your vendor contracts. However, it is imperative for buy/sells. Often buyers do not want to take any contracts during the transaction because they already have contracts with their own vendors that they just want to add this new store onto that contract. After you close, you don’t want to be stuck paying for vendors due to automatic rollovers. Know when your vendor contract terminates, and if you haven’t already, do not sign up for long term contracts.
You should know during the negotiations which contracts need to be part of the deal. For example, if you have 3 years left on your DMS contract, you may want to negotiate that into the transaction with the buyer. Keeping your vendor contracts clean makes for a cleaner deal for you and the buyer.
Encumbrances
Make sure you know all of the liens on your dealership assets? The assets you are selling should not have any encumbrances at the time of closing. If you have encumbrances, you can pay them out of closing proceeds, but you need to know what they are. You may have to disclose them during the due diligence period. If you will be paying off certain liens through the closing proceeds, you will want to know how much is owed because it will eat into your net from the buy/sell. Be aware of your outstanding liabilities, and remedy those prior to selling your dealership or have a plan for them at closing so that all assets are free and clear at closing.