Author: efgmarketing

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Agency Services

Deliver Value Through Strategic Guidance

Do you have a client considering selling their dealership – or acquiring rooftops to add to their portfolio? Do you know your clients’ five-year strategic plan – or even next year’s plan for revenue generation? If your answer is ‘I don’t know,’ then you are leaving a tremendous amount of money and value on the table.

At EFG, our award-winning client business model is based on being a strategic partner and having a seat at the table for these critical discussions. Proactively engaging with your client is the best way to deliver much-needed value in 2024.

Dealer principals are driven by income development and market differentiation that supports their wealth management goals. Fortunately, the buy/sell market for the retail automotive space has been hot for the last few years. The Q3 Haig Report indicates that demand for acquisitions has remained strong and will continue into 2024. This year has seen some of the most significant retail automotive acquisitions to date, even as the car industry grapples with ongoing economic headwinds.

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EFG Companies

Three-Pronged Focus Delivers Value

In October of this year, average new car transactions were about 21 percent higher than the same month three years ago when no end was in sight for the pandemic. Conversely, average transaction prices are also about 20 percent higher than in October 2020. Despite moving more metal, falling profits have dealers feeling particularly uncomfortable; hence, the automotive industry saw declines in the Q3 2023 Cox Automotive Dealer Sentiment Index, which declined for five consecutive quarters.

According to Cox Automotive economist Jonathan Smoke, “The latest index indicates that persistently high interest rates and lingering concerns about the economy and market conditions are dampening overall dealer sentiment. Franchised dealer optimism is on the rise, whereas independents are less hopeful due to affordability issues that more acutely affect the used-vehicle market and their businesses.”

With the UAW strike in the rearview mirror and inventory strong, there is room for optimism for dealers facing a hesitant buyer’s market. According to Kelley Blue Book data, new car average transaction prices (ATP) stayed flat month-over-month in October at $47,936. Cox Automotive reports that new vehicle transaction prices fell more than 3.5 percent year-to-date as downward price pressure continues to favor buyers in the market. Manufacturer incentives also increased to an average of $2,400 in October as OEMs lent support to move units off dealer lots.

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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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