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Training with a Capital ‘T’

Glenice Wilder

According to Wards Intelligence, U.S. light-vehicle sales softened in January after December’s strength. While January’s weaker results were likely a pull-back from December’s surge, affordability and inventory also played roles, with availability well below historically normal levels. At the same time, interest rates for financing purchases were at long-time highs, and the inventory mix on dealer lots is weighted toward higher priced vehicles.

Interest rates and inflation clearly put a damper on sales in 2023, but some positive economic news in January should prove beneficial. Consumer sentiment is showing signs of improving as inflation eases and gas prices drop across most of the country. Hiring picked up sharply in January as employers added a booming 353,000 jobs, highlighting a labor market that continues to defy high interest rates and household financial strains, while at the same time incomes of most Americans are growing.

Joe Langley of S&P Global Mobility notes the U.S. economy has shown a resilience that points toward growth “for the foreseeable future.” Sales of new vehicles should reach 16 million units this year, which is healthy but still short of the auto industry’s high-water mark of 18 million units set in 2018.

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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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Industry Trends Training

Compliance Training Counts

We are nearing the end of the first full month with the new Administration and there has been a lot of activity from Washington. Vaccine distribution is rolling out, COVID-19 cases are trending down across much of the country, and Congress has a stimulus package to address. All of these actions bode well for the retail automotive industry, which is eager to ramp up sales.

There have been some notable actions around compliance. Former Federal Trade Commission (FTC) member Rohit Chopra has been nominated to head the Consumer Financial Protection Bureau (CFPB). During his tenure with the FTC, Chopra was active in pursuing abusive and discriminatory lending practices. Specifically, Chopra has signaled interest in establishing more protections against auto lending abuses, specifically for members of the military, Black and Hispanic consumers. If confirmed, Chopra would replace current CFPB head Kathy Kraninger.

And, while recent efforts on the virus front look positive, consumers have become accustomed to shopping online and this trend is likely to continue. Dealers who have successfully pivoted to a more digital sales model are expected to continue to see success. But an increased focus on compliance from federal, state, and local entities calls for a solid compliance training refresher for dealer sales and F&I staff.

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