The Number One Concern Car Dealerships Have Right Now Isn’t Hard to Guess
The recently conducted survey by Cox Automotive Dealership Sentiment Index (CADSI) has shed light on the current state of new car dealerships in the United States. Aimed at understanding the concerns and viewpoints of these businesses on the auto industry, the survey unveils fascinating results.
What is the top concern for car dealers?
Unsurprisingly, the top concern for car dealerships this year isn’t directly related to vehicles or customers – but instead, it’s the broader economy.
A substantial majority of the dealerships expressed their worry about the economic landscape as the main hindrance for their businesses in 2023. The lingering unpredictability of the economy, with its potential to influence consumer confidence and spending power, is seen as a significant roadblock for the auto industry.
What other concern was close behind?
In close pursuit of the economic concern, interest rates have also emerged as a significant apprehension for dealerships. Interest rates directly impact the cost of financing for both dealers and consumers, affecting inventory acquisition and customers’ buying power.
Higher interest rates can deter consumers from taking loans for car purchases, and this, in turn, can lead to lower sales for dealerships.
According to Cox Automotive, “When asked about factors holding back business, the Economy (55%) and Interest Rates (53%) are the top two factors cited by both franchised and independent dealers.”
The economy and interest rates were also the top two in the first quarter, and even though the order has switched, the economy is now in the top spot. A year ago, limited Inventory was the leading factor and is now the third most often mentioned factor.
How are these factors hard for dealerships to overcome?
One of the frustrating aspects of these issues for car dealerships is the limited control they have over them. Both the economy and interest rates are determined by macroeconomic factors and policies implemented by the Federal Reserve and government, far beyond the influence of individual car dealerships.
As such, these factors present challenges that are hard, if not impossible, for car dealerships to surmount directly. They are instead left to navigate these challenges as best they can, responding to changes as they occur and doing what they can to mitigate impacts on their businesses.
Navigating an uncertain terrain: the struggles and resilience of car dealerships
The key takeaway from the Q2 2023 CADSI report is a snapshot of an auto industry grappling with significant external pressures. Car dealerships are facing challenges marked by economic uncertainties and interest rate concerns, over which they do not have much control. Despite these, they continue to strive to provide service to consumers and keep the wheels of the auto industry turning.
Car dealerships continue to keep the auto industry’s wheels turning. This resilience, underscored by a deep understanding of their industry and customers, has allowed car dealerships to weather storms in the past and will likely be their guiding light through the uncertainties of 2023 and the years ahead.