Industry Trends

Hope for 2021

Without a doubt, 2020 has been one of the most challenging years many of us have ever experienced. Yet, I am optimistic that 2021 will bring some sense of normalcy. It will take some time but I truly believe that when we reach the end of next year, we will all breathe a collective sigh of relief.

There have been some bright spots this year. Industry analysts report that 2020 is on track to be an all-time record year for dealership profits. Some factors driving those profits include right-sized new vehicle inventory levels, lower business overhead due to many expense cuts, and greater F&I revenue per vehicle. Hopefully your dealership capitalized on these bright spots and you’re ending the year on a positive note.  But I would be remiss if I didn’t caution you on some things to consider for 2021 – just to make sure you keep more of that revenue in your pocket.

Areas to watch for 2021

Inventory could be an issue for the first half of the year. According to Cox Automotive, dealers and automakers had 2.87 million unsold vehicles on lot in December – a 200,000 gain over November. While December is historically one of the biggest sales months of the year, this year may be different. The presidential election overhang and the lack of a December stimulus check could stifle those year-end purchases.


Drawbacks of A La Carte F&I

Whether you are a franchise or independent dealer principal, you want to offer the perfect blend of F&I products that match your inventory and your customers – as well as delivering the highest revenue. It can be tempting to pick and choose products from a couple different providers, in search of the perfect mix. But at the end of the day, there are many drawbacks to taking an ‘a la carte’ approach to your F&I menu. Let’s consider a couple of case studies to shed some light on the challenges of an ‘a la carte’ approach.

Independent dealer streamlines F&I, sees business and revenue boost

Novak Motors prides itself on the quality, value, and level of service offered within each rooftop, and has been recognized as the nation’s #1 lease return outlet. With locations in Texas, New York and New Jersey, this leading independent dealer has been recognized by CarGurus, CARFAX, and DealerRater.  But with all of these accolades, there was one major issue. Novak’s sales, F&I and back-office accounting teams were expending vast amounts of valuable time reconciling around three very different F&I providers.

Economy Industry Trends

The November Election and Your Reinsurance

We are just a few days away from the presidential election – as well as several state, county, and city races. As a dealer principal, you are likely watching the races for their impact on your strategic planning to ensure your financial positions are secure. While we do not have a crystal ball as to the outcome of the election, we do have some data points to assist with your strategic planning.

We all know that historically a typical Democratic policy reflects higher taxes on businesses, and a typical Republican policy touts lower taxes. While it is ineffective to apply this thinking across the board, the historical perspective can be useful in planning scenarios. Perhaps more importantly, there are some specific tax policies which could be in play depending on changes in congressional power.

Democratic Control and Taxes

If the Democratic candidate wins the presidential election and Democrats take a stronger position in Congress, there is a probability that corporate taxes will increase. More specifically, congressional Democrats may seek to remove the Bush-era qualified dividend tax break, affecting Controlled Foreign Corporation (CFC) and Non-Controlled Foreign Corporation (NCFC) reinsurance positions. To understand the implications of this, let’s consider the dividend breakdown. In terms of tax policy, there are two types of dividends: unqualified and qualified.