The powersports market hit a wall in July 2023 versus July 2022, notching declines across sales, parts, and service, with combined revenue declining an average of 6.9 percent across the country, according to 1,700 dealerships who use Lightspeed DMS. This is a dramatic change from the previous month when dealerships saw a combined revenue bump of 4.9 percent. The average dealership reported a 7.3 percent decrease in new and preowned sales revenue versus a year ago.
What happened? Some dealers posit that customers were looking for premium models which remain in short supply. Others shared that consumers continue to feel the pinch of high interest rates, prompting them to press pause on their purchases and retain their existing models a bit longer. As major OEMs debuted their 2024 models this summer, are your buyers simply waiting for the latest and greatest? Or were the July numbers the harbinger of a rough landing for the end of the year?
Either way, it is imperative that dealer principals keep an eye on one key metric – negative equity. During the pandemic, supply chain issues and COVID stimulus checks prompted many buyers to purchase a new unit at record high prices. Interest rates were still manageable, and consumers were stuck at home, looking for an outside recreation option for the family. Fast forward to 2023 and Americans have bought into the lifestyle of getting away from it all and enjoying time with the family, but it’s time for a new unit. Efforts to trade in their entry vehicle reveal a disappointing outcome – they are underwater on financing and the lender is unwilling to take on the negative equity with a new purchase.
This sneaky finance sinkhole can have wide ranging impact for your customers and your dealership. Fortunately, you and your team can avoid unnecessary pitfalls with education, transparency, and sound customer engagement.
In our most recent episode of the F&I Talk Outside the Box podcast, EFG’s Regional Vice President of Agency Services, Ryan Musgrove spoke with the EFG training team about the current state of negative equity and what steps dealers can take to support their customers while continuing to move units. Their overarching message was simple. Make sure your team is practicing consultative selling!
Turn a negative into a positive
Your team is incentivized to move units. But do not fall into the trap of selling a unit that’s simply too expensive for the customer to effectively manage. Nothing is worse than getting a customer into finance and realizing you can’t get the payments down to an acceptable level and still make a profit. Put both your sales and F&I teams in a better position by training the sales team to have up-front discussions about a customer’s financial position to land them on the right vehicle the first time.
Having the right group of lender partners can also prove beneficial when matching the right vehicle to the buyer. Take another look at your pool of lenders to make sure you have the right partners to match your customers’ needs. This might mean working with more local lenders and more training on each lender’s protocols and requirements.
And, do not forget to include vehicle and debt protection products. These tools are invaluable when it comes to keeping the unit on the road and protecting all parties in the event of unanticipated challenges including vehicle breakdown, total loss, or even unemployment.
While each customer is different, the overarching need for consumer education is paramount. This is a prime opportunity to educate your customers about financing, purchasing a unit based on means versus wants, and the value of F&I protection packages.
Not sure if your team is prepared to discuss these details? Our proven team of EFG trainers bring years of experience. At EFG Companies, we’re more than an F&I provider, we’re your business partner with years of expertise in the retail powersports industry. Contact us today to learn more about how our team can help you achieve your winning strategy.
