Category: Dealership Training

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Dealership Training Economy

Leasing On the Rise Again

Vehicle affordability continues to be the albatross weighing down vehicle sales in 2024. While a  joint forecast from J.D. Power and GlobalData reflects new vehicle sales rising 1.4 percent year-over-year to 1.21 million units, the average listing price in February was projected at $47,142. This amount is down one percent from early 2023. Regardless of this slight decline, when MSRP is combined with perniciously high interest rates, financing a new vehicle is still out of reach for a large part of the buying public.

But there is a trend worth noting that offers a glimmer of hope to the buyer who needs an affordable new vehicle – leasing! The Experian State of the Automotive Finance Market Q4 2023 reflects that the percentage of borrowers who choose to lease is up significantly. Leasing has always been popular with prime and super prime consumers. However, the auto industry saw a jump in subprime and near-prime leases as well.

Leasing Graphic from Experian
Source: Experian State of the Automotive Finance Market Q4 2023 Report
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Dealership Training

Where Has Negotiation Gone?

At the beginning of October, Cox Automotive reported that while new vehicle sales declined 1 percent at the end of September, overall sales are up19 percent year-over-year. For used vehicles, sales increased 4 percent at the end of last month and are up10 percent year-over-year. While this might sound like a rosy projection for the remainder of the year, there are some troubling factors.

Auto loan rates moved higher to start October with an average new vehicle loan trending up to 9.95 percent and a used vehicle loan is tracking at 14.16 percent. Consumer sentiment is dipping down as the rate of inflation continues to impact Americans. Additionally, new vehicle supply is up 15 days year-over-year and holding steady, meaning vehicles may not move off your lot at a steady clip.

But there is a much bigger issue impacting your vehicle sales – failure to negotiate! I’m not talking about the hard-nosed, fight for every dollar type of negotiation. I’m talking about engaging closely with customers, understanding their needs and financial situation, and working with the entire dealership staff to find the right car for the customer.

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Dealership Training Industry Trends Training

Consultative selling

The United Auto Workers strike at a few U.S. manufacturing plants has consumed the daily news cycle over the past few weeks. While new vehicle inventory has largely recovered from the pandemic-induced supply chain issues, dealer principals are closely watching how events unfold before adjusting year-end plans.

As dealers face an uncertain 4th quarter, consumers are also casting a sideways glance at their economic future. According to the Experian State of the Automotive Finance Market Q2 2023 report, auto loan delinquencies rose past pre-COVID levels and new vehicle values continued to climb while LTV decreased. While the Federal Reserve held interest rates steady this month – for the second time this year – rates remained at a range of 5.25 percent to 5.5 percent, the highest level since 2001. But auto lenders continue to take their pound of flesh as the average auto loan interest rates across all credit profiles ranged from 5.18 percent to 14.08 percent for new cars and 6.79 percent to 21.32 percent for used cars.

Americans owe $1.56 trillion in auto loan debt, according to the Federal Reserve Bank of New York, accounting for 9.2 percent of American consumer debt. The average payment for new vehicles was a record-high $742 in the second quarter of 2023, with loan terms up to 74 months, according to Experian. Think about paying $742 every month for the next five years on possibly two vehicles. A lot can happen during that time, including layoffs, unexpected repairs, theft, accidents, etc.

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