Dealerships and salespeople alike have reaped the benefits of healthy profit margins over the last few years. However, just as the margin pendulum swung deep into seller’s market territory, it’s beginning its backward trajectory into a buyer’s market.
While inflation and lack of inventory have kept vehicle prices high. Interest rates, climbing debt, and lack of affordable vehicles are pressuring more consumers out of the market. According to Experian, during the first quarter of 2023 the average APR for prime consumers fell between 6.40 percent for new vehicles and 8.75 percent for used vehicles. Think about that for a second. If a prime consumer can’t get a rate below 5 percent, what does that mean for nonprime and subprime consumers?
As of 2021, Experian reported that nearly one in three Americans had a subprime credit score. So approximately 33 percent of your customers don’t qualify for an 8.75 percent APR. Their range spans from 8.86 percent to 21.32 percent. On top of the APR issue is rising debt. Because consumers purchased both new and pre-owned vehicles priced well above historical norms for the last three years, those three-year-old consumers are returning to dealerships with significantly less of their auto loan paid off. According to Edmunds’ fourth quarter data from 2022:
- The number of vehicle sales involving negative equity on a trade jumped by 17 percent year-over-year.
- The negative equity value also increased by 29 percent.
As an industry, we must admit that selling a vehicle has been fairly easy over the last three years. With low interest rates and limited inventory options, dealers held all the negotiating power. Additionally, with the rise of online purchasing and pre-orders, salespeople fell into the role of order takers. Now that we’re moving out of the take it or leave it market, it’s high time your sales team started to dust off their sales habits. Your sales and F&I teams will likely need a refresher course – at a minimum – or a complete training upgrade given the digital sales environment and the in-progress transition to electric vehicles.
Training turns teams into sellers
Mention mandatory training and you’ll likely get a massive eye roll. As a dealer principal, you know training comes in many shapes and formats, and should be used as a tool to educate, support, and motivate your sales team. Used properly, training is a creative approach that keeps your sales team engaged while reinforcing good habits that drive revenue. By setting clear goals and expectations through training, your team can be successful during these challenging times.
Good sales habits start with meeting the customer where they are and asking the right questions. But those two tasks have changed dramatically over the past three years. A Cox Automotive State of Dealer Staffing Report reflected that the new digital retail sales environment has changed traditional job roles, requiring new skills and training to be effective. Staff are eager for proficiency training on using those digital tools and communicating with diverse demographic groups.
Not every team member needs the same training. Our training team at EFG believes behavior-based training is the best approach to delivering proven results. We assess the individual needs of each participant, measure their performance through the various course offerings and follow-up with dealership management to ensure learned behaviors are supported and implemented.
Training does more than support your current staff. It’s a major selling point for recruiting new team members. The Cox Automotive staffing report indicates career development is the number one component in hiring and fostering a motivated, engaged team. With continued labor and hiring challenges, training can address many of the issues facing dealer principals today.
The good news – our proven team of EFG trainers bring years of experience and a curriculum that can refresh your sales team while helping you hire and retain new staff. At EFG Companies, we’re more than an F&I provider, we’re your business partner with years of expertise in the retail automotive industry. Contact us today to learn more about how our team can help you achieve your winning strategy.