NIADA’s Scott Lilja on the Auto Dealer Challenges Facing Today’s Independents
Today’s independent auto dealers are under pressure. Changes in financing, competition, inventory, regulatory issues and shifting buyer preferences are among the challenges that have left many members searching for answers.
Jennifer Reid, Senior Director of Product Marketing at Equifax, recently caught up with Scott Lilja, Senior Vice President of Member Services at National Independent Automobile Dealers Association (NIADA), to discuss the many challenges facing today’s independent auto dealers. NIADA represents approximately 20,000 independent used car dealers, including wholesale auto auctions, wholesalers, franchise dealers and even some independent repair shops.
Reid: What obstacles and challenges do today’s NIADA members face?
Lilja: One challenge that’s come up over the last five years has been access to clean, retail-ready inventory. When new car sales dropped off the cliff in ’08 and ’09, trade-ins fell, so there was no leasing activity — no off-lease returns. Leasing dried up and finance companies became very conservative and less aggressive in the leasing market. Used vehicle valuations increased drastically, which caused a lot of dealer competition when those leases were turned in. We saw a dearth of available inventory in auctioneering and dealer-to-dealer wholesale activity. So, dealers were really struggling to find the cars their customers wanted. It’s starting to come back slowly this year, and by the end of the year, we’ll have about 2.5 million off-lease units coming back. Next year, that will ramp up to about 3.5 million, followed by 4.5 million by 2016. New car sales have come back, increasing trade-in activity.
Reid: What about franchise dealer activity in the used retail market?
Lilja: Franchise dealers have really stepped up their activity around the older retail vehicles — five-year, 70k-mile units. Used cars went from being a “stepchild” at new car dealerships to a real ramp-up in activity and support in the last four to five years. Many of their new car customers took a major hit in their credit profiles during the last downturn, so they migrated to older used cars. Using inventory management tools, many new car franchise dealers woke up to the sizable gross margins in this segment. With all the transparency on the Internet about new vehicle pricing, it has become very difficult to stop the erosion in new car retail margins.
Reid: Has access to quality auto-finance resources improved?
Lilja: It’s improved with the independent subprime providers. But the big national providers have pulled back and are much more selective and targeted as to who they’ll do business with. Here, Equifax dealer tools can help with risk mitigation, turning auto-finance paper more quickly, and potentially attracting additional auto-finance resources to a dealership.
Thriving in today’s hyper-competitive economy will require strong cohesion among auto dealers, as well as powerful new tools to seize opportunities in financing and identify buyer trends. To learn more about Equifax solutions for dealers, please visit: https://insight.equifax.com/category/industries/automotive/
Image source: Flickr
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