Key Trends Impacting Auto Dealers in 2019

Atlanta auto dealerships are required to manage multiple variables on the path to growing and sustaining profitability and success. Attention needs to be focused not only on new and used car sales, but also on financing, sale of insurance products such as extended warranties and service department opportunities. Beyond this, intangible factors such as economic strength, interest rates and borrowing standards can have an impact on dealership performance. The convergence of these variables and how they are managed are a strong indicator of how well a dealership will perform. As the first quarter of 2019 draws to a close, there are important trends that auto dealers need to consider and accommodate to maximize growth potential. According to Top Insights Shaping the Automotive Industry in 2019,  dealers will have to contend with the effects of recent tariffs, rising interest rates, changing consumer mindsets about car buying and more to lead their business to increased profitability. To help clients, prospects and others understand the trends and potential impact on their business, Wilson Lewis has provided a summary of key findings below.

Auto Dealership Trends

• Import Tariffs – The news of tariffs on steel and aluminum raised concern among many about the increased cost to build new vehicles. When the tariffs on Chinese imports were announced the concerns intensified because of the number of electronics used in new luxury and crossover vehicles. While the impact is not yet known, independent and franchise dealers are expecting it to affect them in various ways. According to the study, 57% of franchise dealers and 33% of independent dealers expect a negative impact from the tariffs. At the same time, only 9% of franchise dealers and 11% of independent dealers expect there to be a positive impact.
• Service Department Business – An area where dealers need to improve on is capturing the service business of those who purchase vehicles. According to Cox Automotive, 70% of consumers who purchased a new vehicle did not return to the dealership for service within the following 12 months. This reflects not only the customer service issues that are prevalent in many dealership service departments but also a significant amount of missed revenue. The study cited inconvenient locations, perception of overcharging and unreasonable parts and labor costs as the primary reason’s consumers don’t return. What’s interesting is that 60% of consumers indicated they would be willing to travel farther for a better service experience while 54% are willing to pay more for it. It’s clear that in order to recapture lost opportunities, auto dealers need to focus on delivering a service-focused experience to consumers.
• Rising Interest Rates – One of the most negative factors impacting new car demand in 2018 was rising interest rates. The increased rates impacted the cost of leases the most. This change caused consumers to move away from new car financing and evaluate financing on used car purchases as an alternative. While it appears additional interest rate increases are not likely for 2019, auto dealerships need to be prepared with other options to meet changing consumer needs.
• Improving the Online Experience – The study revealed that 85% of consumers are more likely to buy from dealerships that allow them to complete one or more steps of a vehicle purchase online. 83% want to do one or more of the purchase steps online before coming to the dealership. These findings reveal the attitude of consumers about spending time in the dealership and their expectations in the process. It’s essential for management to review their digital tools and to re-evaluate their online experience to ensure its meeting consumer needs.

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While the cost of vehicle ownership may be moving upward due to economic factors beyond the control of management, there are still steps that can be taken to enhance profitability. It’s clear from the study that consumers are looking for an easier car buying and service department experience. The more a dealership implements changes to accommodate this reality, the greater their opportunity to drive growth. If you have questions about the survey, it’s findings or need assistance with an auto dealership audit, tax or consulting issue, Wilson Lewis can help! For additional information please call us at 70-476-1004 or click here to contact us. We look forward to speaking with you soon.