Category: Industry Trends

Categories
Industry Trends

Hope for 2021

Without a doubt, 2020 has been one of the most challenging years many of us have ever experienced. Yet, I am optimistic that 2021 will bring some sense of normalcy. It will take some time but I truly believe that when we reach the end of next year, we will all breathe a collective sigh of relief.

There have been some bright spots this year. Industry analysts report that 2020 is on track to be an all-time record year for dealership profits. Some factors driving those profits include right-sized new vehicle inventory levels, lower business overhead due to many expense cuts, and greater F&I revenue per vehicle. Hopefully your dealership capitalized on these bright spots and you’re ending the year on a positive note.  But I would be remiss if I didn’t caution you on some things to consider for 2021 – just to make sure you keep more of that revenue in your pocket.

Areas to watch for 2021

Inventory could be an issue for the first half of the year. According to Cox Automotive, dealers and automakers had 2.87 million unsold vehicles on lot in December – a 200,000 gain over November. While December is historically one of the biggest sales months of the year, this year may be different. The presidential election overhang and the lack of a December stimulus check could stifle those year-end purchases.

Continue reading “Hope for 2021”
Categories
Economy Industry Trends

The November Election and Your Reinsurance

We are just a few days away from the presidential election – as well as several state, county, and city races. As a dealer principal, you are likely watching the races for their impact on your strategic planning to ensure your financial positions are secure. While we do not have a crystal ball as to the outcome of the election, we do have some data points to assist with your strategic planning.

We all know that historically a typical Democratic policy reflects higher taxes on businesses, and a typical Republican policy touts lower taxes. While it is ineffective to apply this thinking across the board, the historical perspective can be useful in planning scenarios. Perhaps more importantly, there are some specific tax policies which could be in play depending on changes in congressional power.

Democratic Control and Taxes

If the Democratic candidate wins the presidential election and Democrats take a stronger position in Congress, there is a probability that corporate taxes will increase. More specifically, congressional Democrats may seek to remove the Bush-era qualified dividend tax break, affecting Controlled Foreign Corporation (CFC) and Non-Controlled Foreign Corporation (NCFC) reinsurance positions. To understand the implications of this, let’s consider the dividend breakdown. In terms of tax policy, there are two types of dividends: unqualified and qualified.

Continue reading “The November Election and Your Reinsurance”
Categories
Compliance Economy Industry Trends

Skipping Steps Is Never a Good Idea

While the country is still in the grips of the pandemic, sales of new and used vehicles showed signs of life in May and June with big pickup trucks leading the way. For the quarter, analysts predict that car sales were off about one-third from 2019 levels, thanks in large part to plant shutdowns and shelter-in-place restrictions imposed in March and April. The economic stimulus CARES and PPP programs, along with enhanced state-level unemployment benefits, provided a bit of a boost in May, prompting consumers to consider purchasing a vehicle. Low interest rates and OEM incentives sweetened the deal. Savvy dealerships who pivoted to online and digital sales were able to capture the bulk of the upswing in June.

Q3 results hinge on several factors. Pandemic hot spots across the country could prompt local governments to return to some level of shutdown. Whether or not Congress provides a second round of stimulus could also have a dramatic impact on consumer confidence. And the U.S. unemployment rate could put a notable damper on both new and used vehicle sales.

Also, let’s not forget inventory concerns. Factories that shut down in March and April are just beginning to ramp up. There will be a noticeable delay in restarting the parts supply chain as well. Areas of the country that experienced strong sales in May and June could be faced with slim pickings on their lots.

But there is another – somewhat hidden – concern. Identity fraud has reared its ugly head. While fraud has always been an area of focus and concern in the retail automotive world, a couple of unique pandemic situations have exacerbated the situation.

Continue reading “Skipping Steps Is Never a Good Idea”