EFG Companies sees the end of record-high front-end profit coupled with external economic challenges impacting the retail automotive, powersports, and automotive lending industries in 2023.
Recessionary uncertainty, evolving sales models and compliance requirements, along with continued growth in electric vehicles (EVs) are just a few issues facing dealer principals, agents, and lenders. As unit inventory and pricing stabilization will bring some relief, dealership management will face declining front-end revenue coupled with higher borrowing costs and cautious consumers. Company leaders recommend implementing sales and service best practices with consumer-focused sales models, relying on training, customer education, and value-driven approaches that support the entire lifecycle of the vehicle.
“Full implementation of the revised Safeguards Rule and the potential new rule from the FTC will not be the only challenges requiring dealer time, consideration, money and training. Success in 2023 will require dealers and lenders to scrutinize performance across all areas of revenue generation if they expect to come close to the historic revenues banked over the last couple years.”Eric Fifield
Fifield and other executives from EFG Companies emphasized there is room for optimism and revenue generation in 2023, despite a projected decline in sales forecasts and lending volume.
Best practices across the dealership will drive revenue for retail automotive in 2023.
A swirl of economic uncertainty, expensive compliance requirements, and unit inventory and floorplan fluctuations will be critical issues facing dealer principals in 2023. Savvy managers who focus on best digital and in-person customer service practices in both fixed and variable ops offset unit and gross profit revenue declines. Dealers who rely solely on front-end unit prices to make monthly revenue projections will miss out on opportunities to generate solid gains through the combination of F&I product sales and the service revenue those products bring in. Every budget line-item matters in 2023.
Nimble agents who deliver what dealers need will rise to the top.
A one-size-fits-all model will not work for F&I agents in 2023. While many overarching issues will impact all dealers alike, agents will need to focus their client service models on delivering the tools and resources that support each dealer’s unique needs, including sales training, compliance support, and creating value-driven product portfolios. Commitment to a ‘total cost of ownership’ model will prove invaluable for the dealer’s bottom line.
Customer focus across all departments will strengthen defenses and generate powersports revenue.
The challenges facing powersports dealers today are largely expected to continue in 2023, with slight changes. Economic uncertainty, evolving dealership sales models, fluctuating profitability targets, persistent staffing challenges, and continued shortages of powersports parts are just a few of the issues which will impact dealership profitability. The smart bet for 2023 is to “play all sides of the ball” by implementing customer service best practices across all departments, with a heavy focus on increasing transparency and communication between taking an order and delivering a unit.
Consumer education will keep the momentum up for auto lenders.
While many credit unions and indirect retail auto lenders realized portfolio gains in 2022, car buyers next year will face growing concerns about the economy, job security, and decreased borrowing power. Lenders who focus on consumer education and deliver value-driven protection products will capture valuable auto loans, thus increasing revenue streams.