Category: Industry Trends

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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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Dealership Training Economy EFG Companies Electric Vehicles Industry Trends

Educational Revenue Opportunities

Attention agents – it’s time to dust off your playbooks, education resources, and training best practices. Your retail automotive and powersports clients are going to need some knowledge in order to have a successful second half of 2023. Gone are the days when sales teams simply responded to pent up demand and took orders for units. Economic headwinds and rising interest rates are prompting consumers to delay purchases. And growing inventories are erasing those healthy margins logged over the last three years. Agents who focus on electric vehicle (EV) education, debt protection products, and sales best practices will prove invaluable to dealers who need to ramp up their level of customer service for a profitable close to 2023.

Let’s look at some of the issues facing your clients – and how you can help them overcome the challenges.

According to Kelley Blue Book and Cox Automotive, May new vehicle inventory reached its highest level in two years. The average listing price ended the month at $47,172, four percent higher than a year ago. To add insult to injury, interest rates on auto loans also continued to climb in May. Your dealer is working with a lot full of high-priced vehicles and consumers who are increasingly uncomfortable taking out a loan for a new car.  These challenges spell opportunity for agents to serve as the trusted resource for dealers, providing their staff with the tools and resources to make the most of every sale and maximize revenue opportunities.

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Economy EFG Companies Industry Trends

No Longer A Seller’s Market

While the industry bemoaned the vehicle production challenges over the last few years, dealers were able to sit back and let the sellers’ market work in their favor. Now, with new vehicle production ramping up and the market stabilizing it’s time to use a different approach. For a dealership to continue to see a sustainable level of profitability for the remainder of 2023, dealers must focus on returning to customer service best practices for both sales and the service drive.

The first half of 2023 saw a surprisingly strong new vehicle market as the available inventory issues resolved. For the most part, a heavy push of fleet sales and a resilient, prime-rated, U.S. buyer overcame high prices and record auto loan rates. However, according to Cox Automotive’s Chief Economist Jonathan Smoke, the second half of 2023 will likely not have the rosy sales experienced earlier in the year. “I do not believe we are on the cusp of exciting growth ahead. The market will still be limited by total available supply, but demand will also be limited by the level of prices and rates, which are not likely to come down enough to stimulate more demand than the market can bear.”

In fact, the first glimpse of this decline began in May as new vehicle inventory reached its highest level in two years and interest rates on auto loans continued to climb. May’s average listing price ended the month at $47,172, approximate four percent higher than a year ago. The average transaction price (ATP) for May increased a scant 0.5 percent from April to $48,528, up $251, according to Kelley Blue Book, a Cox automotive company. While Cox Automotive has increased its 2023 new-vehicle sales forecast to 15.0 million, a gain of nearly 8 percent from 2022, the company expects “headwinds will grow in the second half of this year as credit availability and unfulfilled demand become scarcer.”

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