Economy F&I Industry Trends

2022 Predictions: Demand for Units Bodes Well for Dealers

2021 has felt like a dance with very complex steps, back and forth. In the first half of the year, the economy took a step back with severe semiconductor chip shortages, persistently high levels of COVID-19 infections across the country, and challenging labor shortages. As a result, the seasonally adjusted annualized rate (SAAR) for August dropped to 13.09 million, reflecting a steady decline since the April peak of 18.5 million according to Motor Intelligence. The August reading was the weakest of the year and the lowest since June 2020’s 13.23 million rate, early in the COVID-19 pandemic.

Now, we are experiencing a different story. According to TD Economics, in October, U.S. vehicle sales took a step forward, rising by 6.5 percent month-over-month to 13.0 million SAAR units. Last month’s gain came in well ahead of expectations, which called for a more modest gain to 12.5 million units. These forward steps brought an end to five consecutive months of declines.

However, inventory availability is still taking a step back, putting a false cap on consumer demand. New vehicle inventory remains compressed, with estimates for October revealing that dealership supply slipped to an all-time low of just 20 days. The combination of strong demand and limited inventory has continued to exert upward pressure on new vehicle prices, which are estimated to be up nearly 20 percent from last year’s levels. The October gain indicates that at current depressed production levels, 12 million seems to be the natural floor for sales.

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.

Industry Trends

2021 – Same But Different

As December 31st rolled around, it felt like everyone was holding their breath, ready to put an extremely difficult year behind them. Then, the realists reminded us that the changing of a date really doesn’t wipe away all the challenges we are currently facing.

The 2021 challenges for the auto industry look much the same as they did in 2020. According to The Conference Board’s economic forecast issued January 13th, several factors will impact the US economy in 2021, including:

  • scale of the ongoing COVID-19 resurgence and any resulting lockdowns;
  • status of labor markets and household consumption;
  • size and timing of additional fiscal stimulus;
  • timing and availability of a COVID-19 vaccine; and,
  • degree to which volatility in the US political transition affects consumer and business confidence.