The automotive retail industry has experienced significant ups and downs since the COVID-19 pandemic. During the pandemic, inventory dropped dramatically due to logistical challenges and shutdowns. With demand outpacing supply, cars sold quickly, OEMs significantly raised their MSRPs, and dealers were able to sell above asking price. In fact, prices for some of the most popular vehicle segments, like full-size pickups, increased by over 30% during this period. OEMs, dealerships, and lenders found it much easier to sell, finance, and manage their businesses profitably.
However, in the past 12–18 months, OEM production and the automotive supply chain have returned to normal, gradually rebuilding inventory. Today, inventory has risen by 20–30 days’ supply compared to last year. Many dealers now report having too much inventory. At the same time, interest rates and vehicle prices remain high, and OEMs are reluctant to offer significant discounts or lower prices. As a result, cars are no longer flying off the lots, and consumers, becoming more selective, are delaying vehicle purchases.
In this environment, lenders must offer more competitive options and work on the terms customers prefer in order to win business. Adding to the complexity, consumer expectations for the car-buying process have shifted. Customers now demand more transparency from browsing vehicles online to negotiating and finalizing the deal, whether online or at a dealership. Even Amazon is eyeing the auto market, potentially capitalizing on this shift in consumer preferences by offering car purchases through its convenience-driven platform.
For lenders, this landscape presents many opportunities to gain market share, especially by leveraging technology and real-time, in-market data that provides insights into competitor activities and dealership operations. The most successful lenders are those that use this data to inform their strategies and strengthen relationships with both customers and dealerships.
Data-driven insights help lenders identify gaps in the market, specialize in niche loan and financing options, offer flexible support to customers, and provide a wide range of services that keep customers engaged and satisfied.
Click here to tune in to a webinar on how lenders can use data-driven tools to navigate current challenges and grow their business. Topics include:
- The importance of offering diverse finance and lease options, especially for hesitant buyers.
- How to spot gaps in the market and offer deals and incentives where competitors are not.
- The value of strong dealership relationships in driving business.