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.”