Used Car Dealer Magazine

FEB 2018

Used Car Dealer Magazine, the official monthly trade magazine of NIADA, offers readers the most current news and info on such topics as industry trends,technology,financing,marketing and dealership operations designed to increase profitability.

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Page 22 of 78

/ F E B R U A R Y 2 0 1 8 / W W W . N I A D A . C O M 20 NIADA Q4 Business Confidence Survey I N D U S T R Y N E W S T he economic and corresponding retail sales growth expectations of independent auto dealers improved substantially in NIADA's business confidence survey for the fourth quarter of 2017. Fifty percent of the dealers surveyed said they expected economic conditions to improve in Q1 2018, up from 36 percent in the Q3 survey. Retail sales growth expectations improved from 55 to 67 percent, and the number of dealers who expected to increase their inventory investment this quarter rose 17 percentage points – a 42.5 percent increase from Q3. The results align with a recent survey of members of the National Federation of Independent Business that showed optimism near an all- time high, at a level not seen in 34 years, according to NFIB president and CEO Juanita Duggan. "Small business owners are exuberant about the economy, and they are ready to lead the U.S. economy in a period of robust growth," she said. The big drivers of that renewed positivity include expectations of tax relief from the new tax bill passed by Congress, positive consumer sentiment due to the lowest unemployment rate in more than 30 years and confidence in the current administration's pro-growth, anti-regulation policies. Used vehicle inventory costs remain robust, with the latest Manheim wholesale pricing index up 7.8 percent from the prior year at 134.5. That inflationary inventory situation continues to put pressure on the business expense side of the ledger, which is one reason 57 percent of dealers expected their cost of doing business to increase, up from 45 percent in Q3. That jump also reflects the significant investment independent auto dealers continue to make in their digital showroom – as reflected in the survey, which shows 56 percent planned to increase their digital marketing spend. The expectation of rising expenses also showed up in dealers' perception of the single most important problem facing their business – 25 percent said it was the increased cost of doing business, by far the most popular choice. It was followed by heightened competition from franchise dealers (17 percent), lack of customer prospect traffic/leads and lack of quality retail inventory (12 percent). Significantly, government regulations/red tape, usually one of the most popular responses, was near the bottom of the list at 6 percent. The overall picture shows NIADA members expected business to improve heading into the new year, optimism bolstered by strong 3.9 percent holiday retail sales growth – well above the 10-year average of 2.6 percent – as well as rising wages, stock market strength, increasing employment and a generally positive economic outlook. BY SCOTT LILJA AND SCOTT MCMAHON Scott Lilja is NIADA's senior vice president of member services. He can be reached at scott@niada. com. Scott McMahon is leader of Equifax Automotive Vertical Marketing. He can be reached at LACK OF QUALITY RETAIL INVENTORY LACK OF FINANCING/ CREDIT RESOURCES LACK OF QUALITY WHOLESALE INVENTORY INCREASED COST OF DOING BUSINESS ECONOMIC CONDITIONS GOVERNMENT REGULATIONS/ RED TAPE HEIGHTENED COMPETITION FROM FRANCHISE DEALERS Does your dealership plan to expand its business over the next quarter? (i.e. add new equipment, enhance your building/property) Q2 Q3 Q4 YES 46% 30 % 38% NO 54% 70 % 62% Overall, does your dealership expect economic conditions to improve, stay the same, or decline in the auto industry over the next quarter? Q2 Q3 Q4 IMPROVE 49% 36 % 50% STAY SAME 41% 58 % 39% DECLINE 10% 6 % 11% Do you expect your dealership's credit availability to expand, stay the same or reduce over the next quarter? Q2 Q3 Q4 EXPAND 26% 29 % 31% STAY SAME 70% 68 % 67% REDUCE 4% 3 % 2% Do you anticipate your dealership's total expenses (cost of business) to increase, stay the same or decrease over the next quarter? Q2 Q3 Q4 INCREASE 47% 45 % 57% STAY SAME 42% 46 % 37% DECREASE 11% 9 % 6% Do you anticipate your dealership will invest in more, the same, or less retail inventory to meet anticipated retail demand over the next quarter? Q2 Q3 Q4 MORE 40% 40% 57 % STAY SAME 52% 49% 32 % LESS 8% 11% 11 % Do you anticipate your dealership's retail sales to grow, stay the same or decrease over the next quarter? Q2 Q3 Q4 GROW 56% 55% 67 % STAY SAME 36% 34% 26 % DECREASE 8% 11% 7 % Will your dealership increase, hold, or decrease vehicle retail prices over the next quarter? Q2 Q3 Q4 INCREASE 11% 13% 15 % HOLD 72% 77% 77 % DECREASE 17% 10% 8 % Do you see your dealership's cash flow improving, staying the same, or declining over the next quarter? Q2 Q3 Q4 I MPROVE 50% 49% 56 % STAY SAME 41% 45% 33 % DECLINE 9% 6% 11 % Does your dealership expect customer traffic to increase, stay the same or decrease over the next quarter? Q2 Q3 Q4 INCREASE 44% 51% 63 % STAY SAME 47% 39% 28 % DECREASE 9% 10% 9 % Q2 Q3 Q4 SALES 50% 50 % 50% FINANCE 5% 15 % 8% SERVICE 28% 27 % 29% OTHER 17% 8 % 13% In which department does your dealership anticipate hiring new staff over the next quarter? What percentage of the following categories makes up your total retail automobile sales? Q2 Q3 Q4 PRIME 42% 39 % 40 % BHPH 38% 33 % 36% SUBPRIME 20% 28 % 24% What is the single most important problem facing your business today? LACK OF CUSTOMER PROSPECT TRAFFIC/ LEADS OTHER Considering the following marketing channels, please indicate the level of investment your dealership plans to make over the next quarter. *ONLINE AND MOBILE Does your dealership anticipate hiring any new staff over the next year? *DIGITAL TV RADIO 56% 40% 4% 7% 55% 38% 10% 56% 34% NEWSPAPER OUTDOOR DIRECT MAIL Increase Hold Decrease 5% 60% 35% 12% 61% 27% 15% 55% 30% Increase Hold Decrease Q2 Q3 NO 68% YES 32% Q2 5% 13% 17% 18% 11% 6% 17% 5% 8% Q4 NO 67% YES 33% Q3 6% 12% 12% 17% 6% 6% 25% 8% 8% NO 67% YES 33%

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