Embracing 2021: Dealers speak out

Auto dealers are embracing this year with cautious optimism amid vaccines, open showrooms and improving inventory levels. In spring 2020, car dealers faced huge challenges — closed doors and lots empty of customers. Nearly a year later, dealerships are open and customers are back to buying cars, but the status quo has changed. Dealers must now embrace pandemic-spurred protocols, technology changes, a shift to online car buying, and the slow rebound of car sales. Still, dealers are resilient and are making the changes necessary to get customers behind the wheel. They have adapted to digital sales, taken steps to open lots safely, and committed themselves to being successful during a global pandemic. 1. 2021: A year for optimism The COVID-19 vaccine rollout has begun — the Centers for Disease Control and Prevention has reported that more than 19 million people have received at least one dose, bringing hope to auto dealers that the car buying experience will soon return to pre-pandemic levels, Brian Maas , president of the California New Car Dealers Association told Auto Finance News . The association works with more than 1,100 members and is the country’s largest state association of franchised new car and truck dealers, according to a company statement. “Our dealers are optimistic that 2021 will be a good year for the new car industry and they are excited by the opportunity to work with customers to meet their transportation needs,” Maas said. Dealers in the Carolinas, too, believe the “worst is behind us,” John Brown , executive director of the Carolinas Independent Automobile Dealers Association , told AFN . “They’re looking forward to continuing to increase traffic on their lot,” he said. This is the case in North Carolina, said Robert Glaser , president of the N.C. Automobile Dealers Association . “We don’t see any dark clouds on the horizon that would significantly impair consumers’ drive to buy more cars than they did last year,” he said. “We’re very optimistic, and we’re very bullish on 2021 sales.” Still, this year has started with its own set of challenges. In California, total new-vehicle sales volume declined 20% in 2020 compared to 2019, Mass told AFN . In November, California logged an 8% month-over-month decrease in the number of auto loans and leases created through car dealerships at 191,415, a less than 1% increase from November 2019, according to an AFN analysis of AutoCount data, a unit of Experian Automotive . On top of slow-recovering auto sales, California dealers also face rising costs related to pandemic-related precautions, such as plexiglass dividers, sanitizing procedures, capacity requirements and a shift to online car sales with remote delivery, Maas added. “Some of these changes are here to stay, especially the increasing willingness of dealers to adapt digital tools to meet the customers where they are — largely online,” he said. “While the acceleration of digitization is cutting across all dealership departments, there still is no substitute to seeing the vehicle in person, test-driving it and having a qualified product expert personally explain its features to a customer.” 2. Embracing the digital shift One way dealers are adapting to online car shopping is by acknowledging where buyers are when they come to the dealership, CIADA’s Brown said. “When the consumer comes on your lot, they've already been on the internet. They already know you've got the car they want to buy,” he noted. “The model has changed from looking at various models to that consumer knows what they want when they come on to the lot, and there's a way to get them financed and to get them in that car." Meanwhile, online car shopping poses a unique problem for legacy dealerships with websites that were built without mobile screens in mind, Brown said. Google announced in March 2020 that it would prioritize all search results for websites compatible with mobile device browsing. Websites built for desktops, then, may not show up in top results, potentially costing dealerships customers. The shift to online shopping also extends beyond car sales. In South Carolina, Brown said, dealerships are moving to digital paperwork for creating a temporary tag for a customer’s new vehicle, meaning dealers need the technology and tools to meet changing processes. The process of connecting with consumers also looks different in a digital -first world. Dealers who work with Canada-based subprime lender Axis Auto Finance , for one, are looking to develop their own technology to directly contact customers and improve their lead conversion rates, President Ilja Troitschanski told AFN . Axis, which works with about 1,000 dealerships in its network, provides used-vehicle financing for 30% of Canadian car buyers in the nonprime credit sector. In Canada, more than 84% of used-car purchases are financed, Troitschanski noted. “There is a very intricate relationship between the dealer and the lender. We can’t exist without the dealers, and they can’t exist without us,” he said. Where dealers struggle is in converting a lead to a financing deal, prompting dealerships to use technology to reach consumers directly rather than buying leads, Troitschanski noted. Cue lenders like Axis, who can help by integrating dealers’ leads into the lender’s loan decision process for faster approval and funding, Troitschanski said. “If a dealer can generate their own leads, run them through our preapproval process and only concentrate their salespeople on the leads that have a chance of getting financed, efficiency goes up,” he explained. 3. Direct sales spark concern Dealers want to be sure they remain a part of the selling and financing process, the North Carolina dealer association's Glaser told AFN . He said the “role of dealers in supporting and advocating for the consumer” came up as a top concern in the association’s recent survey of its more than 700 new car, truck and RV dealer members. “The last 10 months have shown that dealers are masters of touchless deliveries and digital transactions. [But] those transactions that bypass the dealer network are the ones that concern the dealers the most,” Glaser added. Dealers worry manufacturers will develop direct-to-consumer sales and financing programs, particularly with electric vehicles, and use dealers strictly to deliver the cars, Glaser noted. “EVs are coming, and the dealer doesn't want those EV sales to bypass the dealer network,” he said. “The dealer believes that if I’m a Chevrolet dealer, I should sell Chevrolets if they’re electric or gas. It’s vital that we keep the dealer as a part of that consumer transaction.” 4. Proving resiliency Despite concerns regarding the COVID-19 pandemic, inventory, and credit availability, dealer sentiment improved on a year-over-year basis in the fourth quarter of 2020, according to Cox Automotive ’s dealer sentiment index. COVID was one of the top concerns for 47% of respondents, followed by inventory, political climate and the economy. Inventory was more of a concern compared with the same period in 2019, but improved overall in the fourth quarter. Supply has been increasing and, as of mid-January, used-retail inventory reached above normal levels at 51 days, with used-wholesale supply increasing to 25 days from the industry norm of 23, according to vAuto data. “Dealer sentiment declined in the fourth quarter as COVID-19 cases increased and market conditions became less perfect than the environment dealers enjoyed in the third quarter,” Jonathan Smoke , chief economist at Cox, said in December. “Relative to a year ago, sentiment remains marginally better, and dealers describe both new and used sales as strong.” This feature originally appeared in the February issue of Auto Finance News , available here . Auto Finance Innovation Summit, the premier event for technology in auto finance, returns March 16-17, 2021, as a virtual experience. The virtual experience will offer the quality networking and education of past events, all through an online platform. To learn more about the 2021 event and register, visit www.AutoFinanceInnovation.com .

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