Categories
Economy

Watching the Economic Pendulum?

Contributing Author: John Stephens Executive Vice President EFG Companies
Contributing Author:
John Stephens
Executive Vice President
EFG Companies

The retail automotive industry has been riding a five year high with average 8.30 percent year-over-year increase in unit sales from 2011 to 2015 according to data from Wards Auto. With the rapid pace of automotive industry growth lending requirements loosened, longer term loans became the norm and more customers who had been holding off on purchasing a vehicle returned to dealerships.

Just like within any economic cycle, after a period of expansion, the pendulum swings to a period of economic reduction. And, everyone is avidly watching the signs to see when that pendulum will start to swing.

Experian’s latest State of Automotive Finance Market Report listed  average new vehicle loan terms increased to 67 months in 2015, while used vehicle loan terms increased to 63 months. This has resulted in a significant growth of negative equity on car notes.

Categories
Dealership Training Economy

Positioning Leasing vs. Buying

Hollis Goode Blog Headshot

Contributing Author: Hollis Goode, Regional Vice President, Dealer Services, EFG Companies

Leasing continues to gain considerable ground in the automotive space as manufacturers place greater emphasis on lease incentives. Is your team taking advantage of this trend?

According to a recent report from Experian, leasing hit a record of 26.7 percent of U.S. new-vehicle volume in the first quarter of 2015. This represents a 1.1% year-over-year growth and the fourth time in the past five quarters when lease penetration topped 25 percent. With this growing trend, we can expect more manufacturer lease incentives in the second half of this year, meaning now is the time to ensure your sales team can not only close a sale, but also a lease.

Ask yourself, does my team know how to positional leasing versus financing? Not sure? Refresh your team by focusing on the basics.

Help customers understand depreciation. While they probably know that all vehicles depreciate as soon as they leave the lot, they probably don’t make the connection that vehicles depreciate at the same rate whether they lease or buy. The only difference lies in what they pay for. With leasing, customers only pay for the time/miles they drive. However, with buying customers commit to the entire cost of the vehicle, no matter how far they drive it or how long they keep it.

Categories
Economy F&I

Post-recession consumers are primed for F&I products. Are you taking advantage of this trend?

Gabe-Aldrete-Blog-HeadshotWe have a paradox! More consumers are returning to the dealership to get out of their old vehicles; yet, there are more decade-old cars on the road today than since the depths of the recession in 2009.

If you’ve been following the news for the past two years, or even just the past month, there is not a doubt in your mind that the economy is improving and consumers are returning to dealerships. Both new and used car sales are up, and lenders across all credit tiers are seeing an uptick in loan volume.

According to the latest “Automotive Market Trends” analysis from Experian, the percentage of vehicles on the road predating the 2001 model year has reached its highest level since 2009. In fact, vehicles in that age group made up more than 28.3 percent of all vehicles on the road. To put this in perspective, before the recession, in 2008, that age group only made up 22.1 percent of vehicles on the road.

It’s understandable that during the worst of the recession, consumers held off on making big purchases like vehicles. With mass layoffs and companies filing for bankruptcy left and right, everyone was concerned about jobs and economic stability.

But now that the economy is expanding, shouldn’t consumers be trading up for a newer model?

According to Melinda Zabritski, Experian Automotive’s senior director of automotive credit, “While the growth in early model vehicles on the road is slowing, getting the most out of the vehicle they purchase still appears to be top of mind for consumers.”

Everyone knows that after the recession F&I managers were faced with a more informed and demanding consumer. But what few have taken into consideration is that this could be a good thing. With consumers hyper-vigilant about stretching their dollars, and getting more value from the companies with which they choose to do business, dealerships and lenders have the opportunity to create lasting relationships by aligning with their needs.

The consumers sitting across from the F&I manager know what it takes and the difficulties involved in maintaining older model vehicles. Imagine talking to a consumer who has dealt with three or more costly vehicle repairs within a single year. While they are concerned with current-model dependability, they still expect to keep their vehicles longer than historically normal.

By structuring your F&I products to meet their current needs, you can significantly enhance your dealership’s brand and generate lasting consumer relationships. Picture the relief on a consumer’s face when you tell them that your powertrain warranty will cover some of the most expensive repairs that could have set them back for months with their previous vehicle; or your vehicle service contract comes with roadside assistance so they’ll never be stranded again.

With their relief also comes increased profits for your dealership as well as the opportunity to build a lasting relationship for repeat business. With almost 40 years of experience in structuring successful consumer protection products, EFG Companies knows how to leverage consumer trends to successfully impact your business. Find out how today!