Many toasted the end of 2017 with a collective “Whew – we made it!” The year was one of contradictions. If you are feeling a bit whipsawed – you’re not alone. From political gains/losses to cultural uprisings, there was no shortage of news.
With 2017 in the rear-view mirror, here are a few data points that characterize the tumultuous year.
- Sales of light trucks and SUVs finished strong while sedans bumped along the bottom of the market metrics.
- While gas prices increased, and even spiked regionally during last year’s natural disasters, improvements to gas mileage efficiency and lighter body stylings helped buffer the impact.
- Even though the major OEMs saw overall sales declines, the final numbers were still the fourth highest since the end of the Great Recession.
- OEM incentives reached record highs, and the volume of lease returns spiked. But used car inventory continued to tighten as the year’s natural disasters prompted the need for replacement vehicles.
What’s In Store for 2018?
Let’s look at some overall economic indicators to frame our view of 2018.
- According to the Federal Open Market committee meeting, the US Gross Domestic Product (GDP) is predicted to remain at 2.5 percent – the same as 2017 but higher than 2016.
- The unemployment rate will drop slightly to 3.9 percent in 2018, lower than the 4.1 percent in 2017 and 4.6 percent in 2016.
- Interest rates will tick up to 2.1 percent after the Federal Reserve institutes planned rate hikes. Inflation is scheduled to remain low at 1.9 percent, up slightly from 1.7 in 2017.
What does all this mean for auto dealers? With strong employment and affordable credit, sales of certain types of vehicles should remain strong. The key here is having the right vehicle. Before any more time passes, evaluate your target markets and your inventory.
However, the slight uptick in interest rates could put a squeeze on those customers with questionable credit or limited employment. Now it is more important than ever to strengthen the relationship between your F&I team and your lenders. Do you have the right F&I products for those in-demand vehicles and the customers who need them? And, do you have the right group of lender partners to support those customers?
Industry associations such as NADA are forecasting a stable 2018 with a slight uptick in revenues. Unfortunately, many of the factors which contribute to this forecast are out of the dealership’s control. But, you can control those things that occur within your four walls. If you put the customer first everyday by providing the products that are specifically relevant to them and delivering the best level of service, then you will be prepared for a smooth 2018.