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Powersports Market

Lean In to Generate Back-End Revenue

After a few years of strong revenue growth, 2023 has marked a firm reversal of this trend in the powersports space. According to composite data from U.S. dealers who use Lightspeed DMS, powersports dealers continued to see overall revenue declines in the third quarter. However, there are some bright spots. That same report reflected small increases in service revenue across the nation. In addition to service revenue, smart powersports dealers are recognizing the value of back-end F&I profitability. Additionally, while it remains unclear how the Federal Reserve will address interest rates in 2024, some recent signs of inflation easing this month could free up some cash for consumers and prompt them to return to their powersports dealer.

According to a U.S. Commerce Department report issued in early December, prices for durable goods declined for five straight months as supply chain delays eased. A University of Michigan Surveys of Consumers December report revealed that consumer sentiment soared 13 percent from November metrics, reflecting an improvement in the expected inflation trajectory . Simply put, consumers are feeling a little better about the economy.

For 2024, we recommend powersports dealers take four simple steps to stay on the path to profitability.

Categories
Dealership Training

Relearning the Art of Negotiation

The powersports market has struggled this year to maintain the high profit margins of the previous few years. Between inventory levels rising and lending rates skyrocketing, front-end margins continue to feel the pressure. As Fall hits several regions known for ATV/UTV use, powersports dealers are hoping the fourth quarter shows some bright spots.

The economic indicators paint a murky picture. While the rate of inflation held steady in September at 3.7 percent, consumer sentiment trended downward reflecting the growing impact of rising prices on discretionary spending. A strong labor market coupled with decreasing prices for fuel and groceries could provide a glimmer of hope.

While these factors are largely out of your control, there is one thing that can make a notable difference – relearning the art of negotiation! Chances are your dealer staff has turned into order takers, giving the consumer a ‘take it or leave it’ attitude that either turns them off completely or shows them a narrow selection of units that don’t meet their needs. I’m not talking about the hard-nosed, fight for every dollar type of negotiation. I’m talking about engaging closely with customers, understanding their needs and financial situation, and working with the entire dealership staff to find the right unit for the customer.

Categories
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.