Categories
Economy Uncategorized

A Soft Landing for Dealerships?

No doubt, it’s been a rough few months for dealerships. The pandemic has delivered a gut-punch to the US economy which contracted at a 32.9% annual rate from April through June, its worst drop on record, according to the Bureau of Economic Analysis. Business ground to a halt during the Spring lockdown, idling retail automotive OEM and parts manufacturers. As the U.S. has started to re-open in places, there were some upticks in retail automotive sales in June and July. U.S. retail auto sales rose by 1.2 percent during the last two months, aided by $600 weekly unemployment assistance payments, which expired at the end of July.

While sales rose over the last couple months, many believe that the U.S. has plunged into its first recession in 11 years, putting an end to the longest economic expansion in U.S. history. Whether this is a long-term recession lasting more than two quarters, or merely the bottom trough on the graph, struggles remain for retail automotive dealerships to maximize revenue opportunities in the second half of the year.

At EFG, we predict continued softness in light vehicle sales with greater downside performance risk than upside opportunity. We expect U.S. new light vehicle sales to finish 2020 around 14.0 million, representing a decline of 18 percent from 2019, and we expect a recovery to approximately 15.6 million retail units in 2021. However, we do see evidence that retail automotive dealerships are successfully managing the impact, and strengthening in F&I is boosting revenue.

Categories
Industry Trends Training

Max Out Productivity

We have had some much-needed good news for dealership productivity over the past few weeks. Parts of the United States are opening to nearly full capacity.  The number of unemployed workers declined a bit as businesses brought back furloughed staff or hired new team members. And, vehicle sales picked up in May, averaging 12.2 million vehicles on an annualized basis, according to Autodata. While no one is popping any celebratory champagne corks, the positive headlines are a balm to our bruised economy.

However, the COVID-19 pandemic remains a real threat. Hot spots continue to flare, sending record numbers of people to the hospital. A large percentage of Americans are still hesitant to visit businesses in person, instead relying on the online platforms that have sustained their lives since mid-March. As a retail auto dealer, how do you maximize your opportunities to sell vehicles?

Digital options pay off in productivity

Since we have all been forced to rely on our online tools during the shutdown, more sales are taking place on digital platforms. A recent Cox Automotive survey found that over half of consumers plan to complete at least some portion of their purchase online. Dealers are encouraging customers to use online shopping tools, including online chat, virtual test drives, trade-in valuation, and financing calculators. However, simply providing online tools is not enough to differentiate your dealership from the competition for today’s consumers.

Categories
Compliance

DOD Reverses Course on MLA Interpretation

Contributing Author: Steve Roennau Vice President Compliance EFG Companies
Contributing Author:
Steve Roennau
Vice President
EFG Companies

In February, the Department of Defense (DOD) issued a statement regarding its interpretation of
the Military Lending Act (MLA). According to a filing in the Federal Register,

“The Department of Defense (Department) is amending its interpretive rule for the
Military Lending Act (the MLA). The MLA, as implemented by the Department, limits the military annual percentage rate (MAPR) that a creditor may charge to a maximum of 36 percent, requires certain disclosures, and provides other substantive consumer protections on “consumer credit” extended to Service members and their families. The Department is now withdrawing the amended question and answer number 2 (Q&A #2), published in the December 14, 2017 Interpretive Rule, which discussed when credit is extended for the purpose of purchasing a motor vehicle or personal property and the creditor simultaneously extends credit in an amount greater than the purchase price of the motor vehicle or personal property.” – federalregister.gov/d/2020-04041

This statement follows a joint petition, filed in January 2018 by the National Automobile Dealers Association (NADA) and the American Financial Services Association (AFSA), requesting the DOD to review the interpretation. When the DOD issued its 2017 interpretation, there was no public notice or opportunity for the NADA and other retail automotive trade associations to comment on the implications.