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In the ever-changing world of automotive sales, the road to success is full of twists and turns. As we navigate further into 2023, the automobile industry is once again witnessing shifts that demand our attention. The industry is in a state of flux, presenting both uncertainties and possibilities. We’ll explore these car industry trends and their implications on dealership profitability. As we navigate these trends and dissect their implications, one thing becomes clear: adaptability and innovation will be the keys to success in this evolving automotive landscape. Buckle up as we explore these trends in detail and uncover strategies to steer your dealership towards profitable horizons in this changing market.   1. Growth in New Vehicle Inventory and Sales: The engine of the automotive industry seems to be revving back to life, fueled by pent-up demand. Throughout August, the total U.S. supply of available unsold new vehicles climbed to a level not seen since April 2021. As per Experian report, the new registration volumes are steadily on the rise, reaching 7.7 million, marking a remarkable 13.2% increase from the previous year. The pent-up desire for new vehicles is palpable, and this resurgence is breathing new life into dealership showrooms. But while this is a promising development, it’s not without its challenges. The increased demand for new cars is just one part of the puzzle, and the declining used vehicle market demands equal attention. 2. Used-Vehicle Supply and Sales Drop: As the new car market gains momentum, the used vehicle market has encountered rough terrain. Cox reported, total supply levels are reminiscent of 2021, but down by 10% from the previous year. Used vehicle registrations continue to decline, with volumes plummeting by 3.6 million compared to 2021, a 2.5% drop from the prior year as per the above Experian trends. The tight inventory to sell and lower sales figures present dealerships with a conundrum. Considering this, it’s imperative for dealerships to explore innovative strategies to bridge the profitability gap. One practical approach is to offer Finance and Insurance (F&I) products that provide tangible value to customers and higher profitability to dealerships. Additionally, diversifying revenue sources across a broader customer base can reduce reliance on a few high-margin sales, ensuring a more sustainable and profitable future. 3. Vehicle Pricing and Affordability Gap: In today’s automotive landscape, the road to vehicle ownership has become a challenging journey for many households. In their report, Cox highlighted that the average payments have surged significantly by 23-39% since 2019, leaving prospective buyers pondering their financial capabilities. The affordability gap has widened, and the dream of owning a new vehicle might seem distant. As we grapple with these pricing challenges, there’s a need for a thoughtful approach to empower consumers. This approach goes beyond the vehicle price tag; it delves into the realm of Finance and Insurance (F&I) products. These products serve as more than just an additional expense; they are a protective shield. By carefully guiding customers through these offerings, F&I teams help buyers understand how these products guard their investments against costly repairs and potential financial setbacks in the future. This perspective shift helps shoppers appreciate the value F&I products offer. They become more inclined to explore these offerings, knowing that they are not just expenses but strategic safeguards for their automotive investments. 4. Potential in Servicing Vehicles Within the Sweet Spot: Amid these changes, Experian data shows there’s a promising sweet spot within the automotive landscape. Over 36.1% of all vehicles fall within the “Sweet Spot” (Model Years 2012 – 2018), marking a 4% increase from 2022 and a staggering 22.8% rise since 2019. This segment represents a substantial portion of the market, with over 103 million vehicles within this range. It signifies an active demand from a significant portion of customers seeking tailored solutions for their cars. By focusing on this specific segment, dealerships can position themselves as solution providers for maintenance, repairs, and additional aftermarket services. Sweet spot vehicles often require higher service and maintenance, presenting dealerships with an opportunity to generate a consistent revenue stream and offset the challenges in profitability. At PRO, we’ve been championing dealership success for over three decades, and car industry trends in this evolving economy is just another chapter in our journey. We’re here to partner with you, offering expertise and support to boost your dealership’s profitability. Reach out to us today, and together, we can steer your dealership towards a profitable and successful future. Trends graphs and charts credit: Experian Analysis and Cox Insights

In a challenging financial landscape, the impact of rising interest rates on F&I (Finance and Insurance) departments of dealerships cannot be overstated. Recent data from the first quarter of 2023 paints a mixed picture for publicly traded dealership groups. As per automotive news report, four of the six major groups experienced a year-over-year decrease in their average F&I gross profit per vehicle retailed. To emphasize, these fluctuations underscore the complex relationship between higher interest rates, vehicle affordability, and F&I sales. In the past year, there has been a noticeable increase in interest rates, affecting various sectors of the economy. For our dealership customers, this surge has translated into unexpected increases in their monthly payments. Meanwhile, behind the scenes, our F&I department has found itself navigating a complex and challenging terrain. Amidst the backdrop of soaring interest rates and lingering economic uncertainties, car buyers find themselves at a crossroads, carefully weighing the pros and cons of their purchasing decisions. Some are considering full cash payments for cars to avoid finance charges. Simultaneously, doubts surface regarding the necessity and value of purchasing Vehicle Protection Products, leading some to question their worth. As we navigate these complex dynamics towards the close of the year, F&I professionals are presented with a unique set of challenges and opportunities that demand strategic adaptability and a forward-thinking approach. This involves preparing and training your F&I teams to meet the demands of changing market conditions and collaborating with F&I agent partners to address the evolving landscape of vehicle protection needs effectively. Effective F&I Conversations Given the high costs associated with vehicles and their maintenance, it’s crucial to approach this conversation thoughtfully. This empowers F&I teams to efficiently guide customers in identifying their specific needs within the F&I realm while highlighting the substantial value these products offer. Furthermore, F&I products serve as a protective shield, guarding their investments against costly repairs and potential financial setbacks in the future. This approach enables shoppers to grasp the significance of F&I products better, making them more inclined to explore these offerings for purchase. Going Beyond Margin Expansion In the face of the challenges posed by soaring prices and sluggish sales, the path to enhanced profitability does not solely lie in margin expansion, which could limit your earnings to a small portion of customers. Instead, consider the principle of earning 1% from 100 customers rather than relying on 100% from just one. This means, diversifying your revenue sources across a more extensive customer base and reducing your reliance on a few high-margin sales. Therefore, by offering added value and introducing new products, you can tap into a broader customer pool, diversify revenue streams, and foster a more sustainable business for higher profitability. Training as a Cornerstone Comprehensive training is crucial for helping your team develop the skills to understand customer needs beyond basic communication techniques. Training fosters a consultative approach, empowering your team to effectively convey the value of F&I products and to identify and address each customer’s unique needs and challenges by asking the right questions. This approach ensures customers fully comprehend the benefits and advantages of these products. Additionally, by instilling this awareness and knowledge, your team can expertly guide customers in making informed decisions to safeguard their valuable investments against increasing repairs. Furthermore, training that creates realistic role-play scenarios within a safe environment offers your team valuable skill enhancement opportunities and bolsters their confidence, enabling them to become more effective sellers. Industry Collaboration to Mitigate Impact of Rising Interest Rates on F&I In the ever-evolving automotive industry landscape, F&I stands as a critical tool for sustaining dealer profitability. The year 2023 presents a complex and shifting scenario marked by competitive trends. The potential for an economic slowdown and rising interest rates underscores the necessity of F&I playing a more prominent role once again. Yet, this indispensable profit center faces another formidable adversary — inflation and high monthly payments. In these times of economic turbulence, where profitability hinges on every decision, it becomes paramount to distinguish between mere vendors and genuine partners. You want a partner who cares about your business and wants to help grow it as much as you do. This is where a consultant partner comes into play. Having traversed every department within dealerships and weathered numerous industry cycles, they understand how to navigate these turbulent waters. Their insights, honed over years of experience, serve as a reliable compass to steer through challenges and harness the opportunities that lie ahead. At PRO, we embody this commitment to dealership success. Our tailored F&I programs are designed with your profitability in mind. Contact us today to discover how our partnership can help reduce the impact of rising interest rates on F&I and significantly enhance your bottom line.  

The automotive landscape has witnessed a remarkable growth in the number of sweet spot vehicles in operation. These vehicles, typically 6 to 12 years old, are in the optimum spot for aftermarket services such as brakes, suspension, and engine repair. Recent data reveals that nearly 35% of vehicles in operation fall within this sweet spot, representing a substantial increase of 19% over the past four years. This surge in potential customers calls for a strategic shift in focus within the F&I department. By aligning the right strategies and focusing on this growing segment, dealerships can unlock untapped potential and drive F&I Profitability with Sweet Spot Vehicles. Let us explore how the rise of sweet spot vehicles offers a strategic advantage and discuss the key steps to maximize F&I profitability.   Can sweet spot vehicles positively impact dealership profitability? When it comes to cars, trucks, or SUVs, regular maintenance is the key to keeping them running smoothly on the road. From oil changes to tire rotations, all vehicles, regardless of their make, model, or year, require attention and care. However, as time goes by, the age of the vehicle often influences the specific repairs needed, the frequency of maintenance required, and even the go-to destinations for getting the job done right. It’s time to tap into this golden opportunity the sweet spot vehicles bring. With millions of cars falling within the prime range, there’s a vast potential for F&I teams to provide comprehensive solutions and maximize customer satisfaction. The expanding potential of the aftermarket sweet spot: The prime market for aftermarket products and services comprises vehicles manufactured between 2011 and 2017. As of Q1 2022, there were approximately 10.5 million 2011 model-year vehicles on the road. However, this lower volume segment will soon move into the post-sweet spot category next year. Simultaneously, the sweet spot will see an influx of approximately 16.5 million 2018 model-year vehicles. Additionally, within the next year, an estimated 16.7 million vehicles with a 2019 model year and nearly 14.3 million vehicles with a 2020 model year will transition into the sweet spot, offering significant potential for aftermarket opportunities. Position yourself as a solution for this group: Firstly, sweet spot vehicles represent a substantial portion of the market, with over 98 M vehicles in operation within this range. Millions of vehicles within the sweet spot range highlights an apparent and active demand from a substantial portion of customers seeking solutions tailored to their cars. Therefore, by focusing on this specific segment, dealerships can position themselves as a solution provider to a substantial number of vehicle owners in the market for maintenance, repairs, and additional aftermarket services. Generate more F&I revenue: Sweet spot vehicles exhibit higher service and maintenance requirements, presenting an opportunity for dealerships to generate a consistent revenue stream. Being in the optimal age range for various repairs and maintenance services, these vehicles necessitate frequent maintenance. By offering comprehensive maintenance packages tailored specifically for sweet spot vehicles, dealerships can meet their customers’ unique needs and establish long-term relationships built on trust and reliability. Furthermore, the relationship nurtured by trust and positive experience can help you generate more references and leads. Leveraging sweet spot data insights: This sizable customer base could be your potential customers for trade-ins, new vehicles purchase, and increase F&I sales of products aligning with customer needs and vehicle conditions. The F&I department could benefit from keeping track of sweets spot data such as model year and types of vehicles in operation to anticipate consumer needs and driving habits. In addition, the aftermarket professionals can ensure ongoing support for the maintenance and repairs of the existing vehicles on the road while also preparing for the upcoming developments in the aftermarket industry in the years ahead. It is evident that professional training holds immense potential in assessing consumer needs and offering valuable ancillary products to maximize the advantages presented by the increasing age of vehicles. Capitalize on shifting dynamics in the aftermarket sweet Spot: Overall, by focusing on sweet spot vehicles, dealerships can expand their customer base, increase sales of F&I products, and secure a steady stream of revenue through service and maintenance needs, significantly impacting profitability. Reach out to your growth partner and take advantage of their support to maximize your F&I profitability.  

As we navigate through the phase of growth and opportunity in the retail auto sector, it’s essential to take a moment to reflect on our personal and professional goals for the year ahead. If you’re in the sales or finance and insurance (F&I) department, maximizing your potential and performance should be at the top of your list. But how do you achieve this balance of talent, proficiency, and preparedness? Let’s explore the importance of creating a development roadmap and preparedness to complement your professional goals and how it can make all the difference in your sales and F&I growth and success. Self-assessment forms the basis of your roadmap While goals are centered on the end result, a development roadmap focuses on the specific skills, knowledge, and strategies you need to acquire to reach those goals. The foundation for building a practical roadmap begins with a thorough self-assessment. Your roadmap is an essential tool that will keep you focused on the actions that matter most to your success. This process involves identifying your strengths, areas for improvement, and short and long-term professional goals. From there, you can focus on developing proficiencies, skills, and traits to help you achieve those goals. In addition to self-reflection, a behavioral analysis tool can be an excellent resource for gaining insights into your personality traits, work style, and areas where you may need additional development. However, analyzing the results of such a tool can be a complex process that requires experienced eyes. With the insights gained from your self-assessment and behavioral analysis, you can prioritize the skills, knowledge, and strategies you need to acquire to achieve your goals. Remember, your roadmap is the compass for your growth journey, and it should be revisited and updated regularly to ensure that you stay on track towards your goals. Focusing first on what is within your scope By focusing on what you can change, you can maximize your efforts and improve your chances of growth and success in F&I. For example, instead of setting a goal to increase sales by a certain percentage, focus on the specific behaviors and skills you can improve to achieve that goal. This might include improving your communication skills, learning new sales techniques, or improving your product knowledge. You can make steady progress toward your goals and build momentum for continued growth and success by prioritizing what you can control. Additionally, this approach can help you feel more empowered and motivated as you work towards goals you have greater control over. Preparedness in F&I Once you have started building the necessary skills and knowledge, you will see progress towards your goals. However, it’s important to note that your progress is not just about having the technical skills to perform your job. It’s also about being prepared—having the right mindset, attitude, and approach to face challenges and adapt to change. From an F&I perspective, being prepared means: 1. Having a solid understanding of the various policies, contracts, and products, including their benefits, limitations, and pricing, to effectively engage with customers and provide exceptional service. 2. Communicating the value of the products to customers and addressing any objections they may have. 3. Staying up to date with industry trends, regulations, and compliance requirements to ensure that the dealership is operating within legal and ethical boundaries. 4. Building strong relationships with customers by providing exceptional service and following up with them after the sale to ensure their satisfaction, retention, and repeat business. 5. Collaborating with other departments within the dealership, such as sales and service, to identify opportunities for cross-selling and upselling. 6. Continuously developing new skills and knowledge through training, workshops, and other professional development opportunities. Furthermore, as you reexamine your goals for the new quarter of the year, evaluate your preparedness to achieve them. Identify the goals where you may need more preparation, as these are often the ones with the most significant impact. Remember to prioritize what is within your scope and control. Additionally, don’t be afraid to seek additional resources, professional training, and support to enhance your preparedness. Navigating the market shifts The retail auto presents a different landscape for dealerships compared to the past years, but with a development roadmap in place, you can position yourself to thrive regardless of external factors. Avoid focusing only on the outcome and not on your preparedness to achieve it. Take the time to assess your skills, knowledge, and strategy, and create a roadmap for development that will position you for F&I growth and success in the year ahead. PRO has been utilizing behavioral assessments to help dealership professionals identify their strengths, motivators, and areas to focus on. This tool is a great resource to help individuals improve their performance. In addition, it allows dealerships to retain talents and grow profitability. Let us work together towards achieving your goals this year.

  The retail auto industry has undergone significant changes over the past few years, including shifts in consumer behavior, supply chain disruptions, and technological advancements impacting how dealerships operate. The current challenges of declining sales and affordability issues, along with the increasing number of older vehicles on the road, create an opportunity for dealerships to focus on areas like F&I, which can help maintain your dealership profitability. Analyzing the most significant trends shaping the retail auto industry could help manage their impact on dealership profitability. Therefore, it is critical to monitor the significant shifts in the industry, such as: 1. New light-vehicle sales in 2022 topped 13.7 million units, the lowest number of sales since 2011. The National Auto Dealers Association reports that the industry sold 13.7 million new cars and trucks last year, the lowest number of total sales since 2011. In addition, the semiconductor microchip shortage and other supply chain disruptions dealt a significant blow to the retail auto industry, causing sales to drop by 8.2% compared with 2021. However, this disruption also allows dealerships to strengthen their F&I departments. Dealerships need to maximize profits on each sale. F&I departments could be a profit center to provide an additional revenue stream on each sale, helping offset any revenue loss from lower sales volumes and maintain dealership profitability. 2. Parts-and-service revenue is on the rise. Six publicly traded new-vehicle groups reported same-store parts-and-service revenue of $12.7 billion last year, an increase of 10.5% year-over-year. The companies reported $3.4 billion in same-store parts-and-service revenue for the fourth quarter, up 9.1%. This reflects an opportunity for dealerships to offer F&I products like maintenance plans and service contracts. These products can help customers save money on future service needs while generating additional revenue for the dealership. Furthermore, the trend also highlights the rise in vehicle mileage. 3. Average age of cars increases to 12.2 years. The average age of light vehicles in operation (VIO) in the US rose to 12.2 years, according to S&P Global (formerly IHS Markit). The 2022 average age marks another all-time high. According to the analysis, the global microchip shortage and associated supply chain and inventory challenges could have influenced consumers to continue operating their existing vehicles longer. As the average age of vehicles on the road continues to rise, dealerships have an opportunity to capitalize on the increased demand for repairs and maintenance services. This presents a win-win situation for both customers, who could save on their repair costs, and dealerships, who could generate additional revenue from the services offered, including through their F&I department. 4. Aftermarket “sweet spot” is growing- 6.5% year-over-year increase. According to Experian, 35.8% of vehicles in operation (VIO) now fall within the aftermarket sweet spot, a 6.5% year-over-year increase. As more vehicles fall into the 6- to 12-year-old category, they become ineligible for general manufacturer warranties, increasing the importance of maintenance and potential component replacement for owners. Aftermarket professionals must keep track of the model year and types of vehicles in operation to anticipate potential consumer needs and driving habits. In addition, F&I departments can benefit from professional training to assess consumer needs and offer valuable ancillary products to capitalize on the opportunity presented by the increase in vehicle age. 5. More car owners struggle to keep up with their car payments than they were in 2009. As per Bloomberg, automobile repossessions are climbing, and Americans fall behind on their car payments at a higher rate than in 2009. If used vehicle prices continue to decline and the negative equity gap widens, the situation may worsen. People who cannot trade for a lower payment may end up surrendering their vehicles to the bank. Dealers can improve their profitability by helping customers mitigate negative equity by offering payment solution tools. The tool would help customers make an extra payment each year by making bi-weekly payments, which saves them money in financing charges and helps build equity faster. `Reach out to your PRO Team to implement this tool in your dealership.