Price sells cars.
Sorry to say that, but the facts are the facts. We’re not debating the value of selling features and benefits, or building rapport. I’m talking about how sales volume is affected by the price of vehicles, and the price of vehicles is affected by the economy. Price is an influencing factor to consumer decisions and, in turn, market dynamics affect the price.

There is a problem with dealer mindsets, though. If they sell more cars than normal, they equate it to “a good month”, or because of “some buckling down” the management team did or new training initiative. As much as Bill and I would like to take credit for all of our clients’ successes and minimize our connection to a down month the occasional client has, we first must tip our cap to the economy.

How ready are you to approach this 2017 economy taking shape? After two record years, and the likelihood of a third becoming more difficult, everyone sees sales going flat. Nothing is taking a major downturn, but dealers won’t be seeing steep growth with the customary amount of effort. Here are two ways the economy will shape your business for the rest of the year?

1) Leasing
Leasing is closing in on accounting for a 3rd of all vehicle sales in the United States, and there are expected to be a massive amount of lease returns up in 2017 (as 2016 saw a swell too, which drove up new vehicle sales and leases). Understand that when vehicles come off lease and saturate a market, the plus may be having more customers to convert to new leases/sales, but the downside is the influx of used inventory forces descending compression of used car prices.

When used car prices are sent down, as are residual values, therein making leasing the next vehicle less accommodating or ideal. If vehicles begin depreciating rapidly, shoppers won’t want to pay those higher prices for the same vehicle they did before, and the residual value costs the sale. (Let me know if I need to draw a graphic, but this is not in dealerships’ best interests.)

2) Interests (See what I did there?)
Low interest rates have kept leases a very popular way to drive a vehicle. Even with the current state of tech/consumer behavior to be causing millennials and drivers in metro areas to live a rental/ride-sharing lifestyle, interest rates have made leasing and financing a car still affordable. When interests rate go up (as they’re expected to do at least twice more before year’s end) and that phenomenon is coupled with a glut of lower-priced inventory and unattractive residuals, you see how it will be more work than ever to hit the same goals.

The great majority of people buying cars do so on one primary variable: The monthly payment. Used car prices, New car prices, Residual values, and inventory are all totally affected by the 2017 economy. Not the new mobile app you implemented. Start giving credit where credit is due, and start getting wise to the most influential factors that govern your store’s success.

Is your team trained to be cutting edge at the basics? Let’s hope so.

Is your marketing in line with your revenue and do you have an attribution platform beyond Google Analytics to measure your success rates? I pray you do.

Is your current inventory priced right and stocked correctly? Please tell me they are.

Is your management team actively prepared to capitalize on a leasing market while they still can? Get ready.

It’s better to have the inventory of vehicles coming off lease than not have it on your lot. If your floor plan and space allows, make sure you’re creating CRM processes, marketing strategies, and training initiatives to capture some of the 3+ million vehicles coming off lease.  Loan end and lease ending customers must be reached out to months early. Online scheduling of lease returns must be urged. New options/alternatives/lease numbers must be proactively shared with them to keep the cycle of customers with short term arrangements alive. Your team, your CRM, your DMS, and your equity alert company need to be in placed and actually USED by your team.

Stop resisting training, and improve your lease penetration for the rest of the year as it will get harder and hard to do so in 2019 and 2020. This may have been the most boring blog I’ve written in ages, but it is filled with facts that will affect the profitability of your store far more than any email template or phone tactic I could share. Don’t resist the leasing opportunities (or take the path of lease/least resistance). Prepare yourself for the 2017 economy and do your best to capitalize on what the market gives you.