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Business Growth Dealership Training Powersports Market

Managing Negative Equity

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.

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Compliance

Compliance Still Matters

Powersports dealers have a myriad of challenges facing them today. Between sky-high interest rates and waning consumer demand, profit margins are beginning to feel the sting of a market that is on the precipice of right-sizing. With this mounting pressure, dealers are rightly concerned about how to maintain their profit margins in the weeks and months ahead. All too often, when the going gets tough, compliance falls to the wayside, and you may be asking yourself, “where is the CFPB anyway?”

The CFPB and FTC have not been making waves like they have in the past, but that does not mean they are not present. In fact, the CFPB has been busy this year bringing lawsuits against auto lenders and servicers. You may think that since these suits don’t affect you or your industry, you don’t need to worry.

If that is you, consider this. According to the National Council on Identity Theft Protection, there is an identity theft case every 22 seconds in the U.S. and 33 percent of all Americans have faced some kind of attempt in their lives, with experts predicting this number could increase significantly this year. So far this year, the Federal Trade Commission (FTC) has received 5.7 million total fraud and identity theft reports, 1.4 million of which were identity theft cases accounting for $10.2 billion in losses. This is a great example of why policies like the FTC Safeguards rule were put in place. Compliance procedures often serve as critical guard rails that can protect your customer’s data – and your dealership.

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Business Growth

Maximizing Your Opportunities for Profit in 2023

Consumer demand for off-road, boats, and personal watercraft units remained strong for the first half of 2023. However, high prices and financial barriers have impacted sales. While powersports dealers were early movers in digital retailing, they need to take further advantage of this opportunity to strengthen online sales models to have a successful second half of 2023. In addition, a focus on localized financing and improved service capabilities for older models should offset potential revenue loss.

For the powersports and marine industries, the high-flying days of 2022 appear to have come to an end in the first half of 2023. While May dealership revenue growth notched an increase of 8.3 percent for service and sales according to Lightspeed DMS, growing economic concerns have prompted many buyers to delay purchases. The Powersports Business Q1 Dealer Survey reflected that dealers are split on their outlook for the remainder of the year with many leaning towards “somewhat worse” to “significantly worse.”

Although inventory issues have eased significantly and consumer demand remains strong, overcoming rising prices along with growing interest rates will be a tall order for dealers in the second half of the year. Bolstering online sales, taking a customer-focused approach to ownership, and increasing service capabilities to keep those units operating will deliver needed revenue regardless of any economic headwinds.

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