Federal Trade Commission (FTC) has proposed comprehensive rules changes regarding dealership advertising and how finance and insurance offices are handled. However, dealers, specifically the National Automobile Dealers Association (NADA), aren’t happy with these new ideas and have issued formal challenges to the regulatory scheme.
Younger drivers have reportedly had it with the dealership experience, with Gen Z even more disenfranchised than Millennials. Though it’s difficult to imagine anybody visiting a showroom within the last 12 months having any other reaction. Incentives are down, prices are up, and there’s a good chance whatever you wanted to buy isn’t going to be on the lot anyway. Someone saying they had an exemplary dealer experience is becoming about as common as people claiming they enjoy going to the DMV.
However, CDK Global Inc. still opted to conduct a survey in the hopes of determining just how much less tolerant younger shoppers might be compared to older generations. The takeaway probably isn’t going to shock you, even if the sheer volume of first-time buyers that don’t care for dealerships might. Read More >
Following word that Mercedes-Benz wanted to refocus on producing high-end luxury vehicles with loftier profit margins, the German automaker has decided to eliminate dealerships in Europe so it can move on a direct-sales model similar to what’s offered by Tesla.
The company is reportedly eliminating up to 20 percent of its dealerships in its home country and roughly 10 percent globally (with a focus on Europe). This follows previous assertions by Mercedes that half of the brand’s domestic sales will be done via an “agency model” by 2023. Following an agreement with its own dealer network, the company said late in 2021 that it would begin eliminating the traditional scheme of dealers buying their vehicle stock based on market conditions with consumers coming in to haggle. The new plan puts more financial pressure on Mercedes and eliminates any chance of price negotiation. Meanwhile, dealers will get some cash for every vehicle sold and whatever after-sales services they can render. Read More >
If you frequent this website, there’s a good chance you’ve seen an article discussing how smaller car dealerships are being incorporated into larger entities over the last few years. As with most other industries, the trend has been accelerating and Automotive News just shared the metrics showing how far we’ve come over the last decade. According to the report, consolidation among mega dealers has made heaps of progress of late and should continue on with their mission of never-ending growth because none of them want to become the little guy after every pint-sized showroom has been bought up in North America. Read More >
Genesis is an interesting brand. Decades after Japanese automakers launched premium nameplates of their own, South Korea’s Hyundai decided to spin off one of its sedans into an entire luxury sub-brand in 2015. The resulting vehicles have been solid performers, representing excellent value for individuals in the market for something fancier. Genesis is building real luxury cars and working to differentiate those models from Hyundai Motor Groups’ mainstream products.
But it’s had to overcome plenty of obstacles. While Genesis’ product might be dunking on some of the other Asian luxury brands, achieving the same notoriety has been difficult for the fresh nameplate. The company also isn’t targeting Acura, Infiniti, and Lexus. Its sights are set on the Germans, with many vehicles already comparing favorably. But if Genesis is to become a serious rival, it needs to distance itself from the Hyundai and Kia models it traditionally shares a lot with — resulting in its very first standalone retail store in the United States. Read More >
As the industry continues struggling with its planned swap to electric vehicles, we’ve seen plenty of framing suggesting dealer networks are only too happy to participate. But it’s usually juxtaposed with articles indicating that pushback exists, typically whenever the metaphorical rubber meets the road. This month provided several premium examples stemming from the National Automobile Dealers Association Expo (NADA Show 2022) held at the Las Vegas Convention Center.
Though the best had to be when several dealer groups piped up about how much it’s actually going to cost them to install some of the newer chargers some manufacturers believe should be mandatory if they’re intent on selling EVs. Some showrooms are finding out that not all buildings are wired for the high loads incurred by modern charging systems, requiring additional financial investments they hadn’t counted on. With automotive dealerships using product delays as leverage for unprecedented vehicle pricing, it’s nice to see them getting a taste of their own medicine. Or it would be if the costs for updating facilities weren’t guaranteed to be reflected on future window stickers. Read More >
The Insurance Institute for Highway Safety (IIHS) is claiming that individuals shopping for a secondhand automobile end up learning less about the modern features lurking within their automobiles. Considering salespeople have meetings about how best to hype the advanced driving aids in new models, this one really shouldn’t have required a survey for the IIHS to piece it together. But the outlet appears to be attempting to link this alleged lack of knowledge to make claims that it’ll somehow contribute to the probably of used vehicles being involved in a crash.
“Used car buyers were substantially less likely than new car buyers to know about the advanced driver assistance features present on their vehicles,” stated IIHS Senior Research Scientist Ian Reagan, the author of the study. “They were also less likely to be able to describe how those features work, and they had less trust in them. That could translate into less frequent use, causing crash reductions from these systems to wane.” Read More >
You’re probably well acquainted with dealer markups by now. Supply shortages created during the pandemic have left the world with fewer automobiles and car dealerships are taking full advantage of the elevated demand. As you might have expected, this trend resulted in plenty of people overpaying or becoming cautious of a market they now see as wildly predatory.
Car manufacturers have begun asking dealerships to take it easy on the price gouging. General Motors made its plea last week and Ford has followed up by reiterating its own concerns during the company’s Q4 2021 earnings report. The Oval is worried that dealer markups are tainting its relationship with customers, with top executives making casual references to the trend back in November. Ford CEO Jim Farley is now telling dealers that they need to cut it out lest they be punished by the manufacturer. Read More >
Ford’s sales success with the Maverick pickup has been undeniable. But if you’re in need of more evidence, the automaker has begun notifying dealerships to stop taking reservations on the base hybrid model because it doesn’t even think it can keep up with the existing backlog. Read More >
A new survey from Cox Automotive is suggesting that people are relatively pleased with their trips to the dealership these days — at least compared to the last few years. According to the team that’s been crunching the numbers over at Automotive News, “Buyer satisfaction with the shopping experience from the research stage through delivery dipped to 66 percent in 2021.” Back in 2020, respondents claimed they were happy 72 percent of the time. But in 2019 Cox was only getting 60 percent of shoppers to say they had an okay time buying a vehicle.
The uptick in 2020 is obvious. Showrooms were devoid of customers, production shortfalls hadn’t yet become the norm, and dealers were selling just about everything at a discount — keeping prices low until 2021 sent them into the stratosphere. However, the outlet still framed it as a win against 2019, suggesting that consumers are more satisfied with their shopping experience than before the pandemic. It also claimed that people who purchased vehicles online, the no-haggle alternative to going to a dealership to argue in a small room, tended to be happier overall.
After a tough couple of years, consumers went into 2022 hopeful that unhinged automotive pricing and lean dealer lots would be a thing of the past. However, analysts and industry groups have gone from being cautiously optimistic just a few weeks ago to fairly sullen about the prospects of North American shoppers locating anything that could be considered a square deal.
Goldman Sachs recently issued a report that attempted to encapsulate the whole picture, citing sustained congestion at the ports, pandemic-related factory closures, market inflation, millions of people just dropping out of the workforce, and continued complications stemming from the semiconductor shortage. It estimated that vehicle pricing would fail to go down — and may even pitch up in the first half of 2022 — until all of the above issues have been addressed. But it was hardly the only group chiming in or suggesting that the hard times could last through 2023, as the goalpost for what should be deemed acceptable is moved yet again. Read More >
With so many articles discussing how poor automotive sales have been through 2021, one could be forgiven for thinking this was going to be a hard year for anybody owning a dealership. However, the reality of the matter is that it’s a seller’s market and those who can sell are making a killing off everyone else’s misery.
The National Automobile Dealers Association (NADA) has reported that the ongoing deficit of product has helped the average store rake in more money than they did in 2020, breaking the previous twelve-month profitability record. Today’s average dealership is reporting a net pretax profit of about $3.38 million through October for 2021. That’s more than twice what was tallied within the same timeframe last year and really goes to show how much money can be made when the customer’s needs are the only items being discounted. Read More >
While the official figures haven’t dropped, just about every outlet tracking new vehicle sales is projecting a significant decline in volume for December 2021. Showrooms have been trending toward the minimalist aesthetic since 2019 with the pandemic kicking things into overdrive as supply bottlenecks nullified practically every manufacturer’s ability to produce anywhere near its normal pace.
Last December was bleak, with sales falling by around 5 percent for the month as the typical transaction price for automobiles set new records. The U.S. market only saw 1.54 million sales, the lowest volume witnessed since December of 2014. But 2021 volumes are shaping up to be decidedly worse. This month is on track to fall by anywhere from 23 to 30 percent with retail sales barely cresting 1 million units as transaction prices for both new and used vehicles surpass all previous metrics. Read More >
Car dealers have been polled for the fourth-quarter Cox Automotive Dealer Sentiment Index (CADSI) and they’re still incredibly optimistic, despite losing some of their earlier confidence that new-vehicle sales would be relatively healthy.
The dealer optimism – especially among franchised entities – seems to be wholly tied to profitability here. New vehicle sales dropped in 2019 and absolutely cratered in 2020 due to the nation’s response to the pandemic. In spite of there being plenty of talking heads in the news media telling you not to stress about the economy, inflation has created pricing increases across the board and automobiles are at the tippy top of that list. With inventories remaining relatively lean due to production slowdowns, staggering dealer markups have become the norm. Basically, stores just seem happy that they can charge more per car while they’re in short supply. But they’re also starting to have concerns about the long-term viability of the market and are are feeling the pinch of rising operating costs. Read More >
Used-vehicle prices set another record last month thanks to elevated demand and suppressed production of new cars. Depending on who you ask, the typical transaction fee for a secondhand automobile rose nearly 50 percent in November vs the same period in 2020. While the pandemic had meaningfully suppressed demand during that time, that’s still a staggering increase over any 12-month period.
Sharing Cox Automotive’s Manheim Used Vehicle Value Index, Automotive News nailed down the annual difference to a 44-percent increase. This also represents the November pricing index swelling by 3.9 percent against October, which is noteworthy in itself. But what does that look like in dollars? Read More >
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