Car Dealerships Ford F-150 XLT in Durand WI

Car Dealerships Ford F-150 XLT in Durand WI

February 15, 2018
Posted by: solfa_admin

Most business valuations are driven substantially by the company’s historical financial statements, tempered by other factors such as: location, brand name, management and such. In truth and in fact, the dealership’s balance sheet represents less than half the information necessary to properly value an automobile dealership. The balance sheet is but a starting point from which a number of factors must be An Introduction To Used Car Dealers Ford F-150 XLT Durand WI 54736 added and subtracted in order to determine the true value of the assets.

Valuing new car dealerships has to do with projecting future profits and opportunities based upon the “dynamics” of the particular dealership being valued and of the automobile business itself.

The Internal Revenue Service recognizes that valuations include more than financial statements: “The appraiser must exercise his judgment as to the degree Ford F-150 XLT Durand WI 54736 of risk attaching to the business of the corporation which issued the stock, but that judgment must be related to all of the other factors affecting the value.” Revenue Ruling 59-60, Section 3.03.

DEFINITION OF MARKET VALUE

The definition of market value according to the American Institute of Real Estate Appraisers’ Dictionary of Real Estate Appraisal, is: “The most probable price in cash, terms Investing in Car Dealerships – How to Value Them Ford F-150 XLT Durand WI 54736 equivalent to cash, or other precisely revealed terms, for which the appraised property will sell in a competitive market under all conditions requisite to fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self interest, and assuming that neither is under duress.” American Institute of Real Estate Appraisers, The Dictionary of Real Estate Appraisal. (Chicago: American Institute of Ford F-150 XLT Durand WI 54736 Real Estate Appraisers, 1984), 194 195.

In Revenue Ruling 59-60, the Internal Revenue Service defines “fair market value” as follows: “…the price at which the business would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge and Ford F-150 XLT Durand WI 54736 relevant facts.”

The purpose of Revenue Ruling 59-60 is to outline and review in general the approach, methods and factors to be considered in valuing shares of the capital stock of closely held corporations.

The methods discussed in the Revenue Ruling apply to the valuation of corporate stocks on which market quotations are either unavailable or are of such scarcity that they do not Ford F-150 XLT Durand WI 54736 reflect the fair market value.

The Ruling goes on to state that no set formula can be devised to determine fair market value of closely held stocks and that the value will depend upon such considerations as:

(a) The nature of the business and the history of the enterprise from its inception.

(b) The economic outlook in general and the condition and outlook of Ford F-150 XLT Durand WI 54736 the specific industry in particular.

(c) The book value of the stock and the financial condition of the business.

(d) The earnings capacity of the company.

(e) The dividend-paying capacity. The ability to pay dividends is often more important than a company’s history of distributing cash to shareholders, especially when valuing controlling interests.

(f) Whether or not the enterprise has goodwill or Ford F-150 XLT Durand WI 54736 other intangible value.

(g) Sales of the stock and the size of the block of stock to be valued.

(h) The market price of stocks of corporations engaged in the same or a similar line of business having their stocks actively traded in a free and open market, either on an exchange or over-the-counter. With respect to an individual dealership sale, the Ford F-150 XLT Durand WI 54736 best comparable is the amount the public company paid or received for buying or selling a similar dealership, not what the public company’s stock value or earnings multiple, per se, that is reflected on the stock exchange.

In practice, in arriving at the fair market value of a new car dealership, several different formulas have been used:

1. Return on Investment (or earnings valuation) Ford F-150 XLT Durand WI 54736 Formula: The value of a business to a particular purchaser based upon a return on investment analysis. This value varies from purchaser to purchaser, according to the purchaser’s investment criterion, and it may or may not reflect fair market value. The National Automobile Dealers Association (NADA) refers to this value as “Investment Value.” A Dealer Guide to Valuing an Automobile Dealership, NADA Ford F-150 XLT Durand WI 54736 June 1995, Revised July 2000.

The capitalization rate is determined by the stability of the dealership’s earnings and the risk involved in the automobile business at the time of sale, investment, or valuation. This method is highly subjective as the capitalization rate is based upon the particular appraiser’s perception of the risk of the business; consequently, the lower the appraiser perceives the risk, Ford F-150 XLT Durand WI 54736 the lower will be the capitalization rate and the higher will be the price he would expect a potential purchaser to pay for the business.

In short, the capitalization rate is the appraiser’s opinion as to a rate of return on investment that would motivate a prospective purchaser to buy the dealership. Considerations include those specified in Revenue Ruling 59-60, as well as Ford F-150 XLT Durand WI 54736 available rate of return on alternative investments.

2. Adjusted Net Worth Formula: Net worth of the company, adjusted to reflect the appraised value of the assets used in the day to day operations of a business, assuming that the user or purchaser will continue to make use of the assets. To this “net worth” value will be added blue sky or goodwill, if Ford F-150 XLT Durand WI 54736 any. The “Adjusted Net Worth Formula” is the most common method used in purchasing and selling a new car dealership.

3. Orderly Liquidation Formula. This method values the assets as if all of them had to be sold – not at a “fire sale,” but in an orderly manner and without time constraints. Normally, if the dealership is profitable, some value will still Ford F-150 XLT Durand WI 54736 be placed upon goodwill.

4. Forced Liquidation. The lowest of all values, forced liquidation means that all of the assets must be sold at a forced sale such as an auction, creditors’ sale or by order of a bankruptcy court. A bankruptcy proceeding regarding a new car dealership almost never brings goodwill. This might be the most appropriate formula if the dealership has Ford F-150 XLT Durand WI 54736 no lease (or only a short term remaining on its lease) and cannot, as a practical matter, relocate.

5. Income Formula. The income formula is basically taking the store’s earnings and multiplying it by an appropriated capitalization rate. The trick here is the definition of “earnings.” In determining “earnings” a perspective purchase could use any combination of the following:

(a) current earnings

(b) average Ford F-150 XLT Durand WI 54736 earnings – add the last five years together and divide by 5

(c) weighted average earnings – usually an inverted weight with the current year multiplied by five, last year by four, the year before last by three, four years ago by two, five years ago by one, then adding them together and dividing by 15

(d) cash flow – net income Ford F-150 XLT Durand WI 54736 plus agreed add-backs such as depreciation, LIFO, personal expenses, excess bonuses and such

(e) forecasted earnings – future projected earnings discounted to present day value.

6. Fair Value. NADA also refers to a third value in addition to “Market Value” “Investment Value,” which it calls “Fair Value.” NADA describes “Fair Value” as being “…primarily used when a minority shareholder objects to a proposed Ford F-150 XLT Durand WI 54736 sale of the company in assessing liquidating damages.” and defines it as: “The value of the minority interest immediately before the transaction to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the transaction and without reference to either a minority or non-marketability discount.”

The NADA guide states: It is not common for auto dealers to run across this particular Ford F-150 XLT Durand WI 54736 valuation standard. This author has never used, nor has ever seen this value used with respect to valuing automobile dealerships.

As can be seen in this report, this author in discussing valuations excludes what NADA describes as “Fair Value”.

7. The Greater Fool Theory. The National Automobile Dealers Association publication (A Dealer Guide to Valuing an Automobile Dealership, NADA June 1995), bemuses, in part: Ford F-150 XLT Durand WI 54736 “A Rule of Thumb is more properly referred to as a ‘greater fool theory.’ It is not ‘valuation theory, however.” (In its “Valuing an Automobile Dealership: Update 2004” NADA dropped the reference to “fool” and simply states that the theory is “. . . rarely based upon sound economic or valuation theory,” but advises sellers to “Go for it, and maybe someone Ford F-150 XLT Durand WI 54736 will be stupid enough to pay [it].”

The considerations for valuing new car dealerships are more complex than those used for valuing most other businesses. Dynamics such as the unique requirements of automobile manufactures and distributors can limit the amount of monies that may be paid for a dealership, regardless of what perspective purchasers may offer to pay for the store.

Therefore, the value Ford F-150 XLT Durand WI 54736 of a new car dealership varies based upon the needs and ability of the purchaser and, consequently, the same dealership could have two different values to two different purchaser and both values would be correct.

Thus, our valuation of the subject dealership should be considered in the context and limitations of the facts and history of new car dealership sales as delineated herein.

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    Car Dealerships Ford F-150 XLT in Durand WI

    February 15, 2018
    Posted by: solfa_admin

    Buying a car is both exciting and stressful, and either way, most people want the process to be as quick and painless as possible. While there are multiple options when buying a vehicle, there are at least five reasons why buying from a car dealership may be a better deal.

    Post-Deal Benefits

    Extended warranties, repairs, oil changes, and tire rotations are just a few of the extra incentives that private sellers are unable to offer. Additionally, Five Reasons to Buy a Vehicle At a Car Dealership Ford F-150 XLT Durand WI 54736 lemon laws do apply to private sales, but there is much more security when making a transaction with a car dealership, and peace of mind is invaluable.

    Referral Rewards

    Car dealerships offer further rewards for new customer referrals. Most customers probably take that at face value, but what good salespeople understand is the fact that word-of-mouth is, by far, the most effective method of advertising. If you happen to know someone who is in the market Ford F-150 XLT Durand WI 54736 for a new vehicle, many car dealerships offer a $50 and even $100 cash reward for a referral. Most individuals are eligible to receive a bonus, and these rewards can really add up.

    Financing

    If you aren’t paying in cash when purchasing from a private seller, you will have to secure your own financing, which depends on your credit score. Financial departments at dealerships, on the other hand, have established relationships with multiple financial institutions. These Service the Rest Ford F-150 XLT Durand WI 54736 connections could help you secure a more flexible loan agreement. Remember to balance the loan’s total cost with a monthly payment that you can afford.

    Extra Features

    Dealer-installed accessories, like aftermarket wheels, upgraded sound systems, and fabric protection spray, aren’t even options when purchasing from a private party. You can also add features like a corrosion protection warranty, extended warranty, or curb rash protection plan. A private seller won’t offer this kind of extended personalization. Your Ford F-150 XLT Durand WI 54736 decision is limited by what is on the lot at that moment.

    The Hospitality

    Hey, don’t discount the power of a cup of coffee. The little extras are there for a reason; it’s important to be at ease and comfortable when making a major decision. Car dealerships value their reputations, and if a problem arises after your purchase, they will continue to offer customer service so that you continue to have a positive experience with the Ford F-150 XLT Durand WI 54736 company.

    While shopping from an individual may seem like a more casual and laid back experience, nothing beats the perks offered by a car dealership.

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