Today's episode is part two of a two-part series. We are going to delve into the retail automotive industry and how it has evolved over the past year. The retail automotive industry plays a crucial role in the American economy and is a major contributor to the sales tax base for municipalities. Local retail dealers support schools, little league organizations, and even local churches. They also support the infrastructure, police department, and fire department. It is through the car business that these resources and benefits are made available to everyone in the community.
As we move into 2023, the retail automotive industry is already showing significant trends that will continue to impact everyone involved in the industry, whether they work in sales or service. One of the most striking changes we have seen is in the used car market. One year ago, used cars were hard to find and were selling for 140-145% of their normal price. However, in the last four or five months, we have seen a 10-15% monthly depreciation in the used car market.
One major change that has occurred is the increase in the supply of new cars. This means that it is crucial to get back into advertising and marketing to regain the attention of buyers and avoid an excess of inventory.
Another change that has occurred is in floor plan costs and interest rates. One year ago, the federal interest rate was 1.6%, but today it is roughly 4.5% and rising. This means that consumer interest rates will also be on the rise, which can have a significant impact on the cost of new and used cars.
Another important change to note is in staffing and turnover. In the past year, we have seen the lowest amount of turnover in sales departments in history. This is likely due to the high income potential that salespeople had during the pandemic. However, as margins and commissions decrease, it is likely that turnover will increase as well.
Another trend we are seeing is in the electric vehicle (EV) market. EVs have seen the greatest increase in any segment in the automotive industry. We have seen a massive increase in the number of people searching for EVs over the past year. However, now they are also leading the way in terms of depreciation. Used EVs have seen a significant decline in value, a trend that was not seen in the past two or three years.
The retail automotive industry is a vital contributor to the economy and the community. While there may be challenges, there are also opportunities to increase revenue and grow your business. Stay ahead of the game by staying informed and taking the necessary steps to leverage the current market trends.
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