Just like the early days of the pandemic, we’re facing some uncertainty in the retail automotive market, but we’ve all been here before. Let’s take stock of what’s the same vs. different between those two times to think about what we do next.
What’s the same in retail automotive in a tariff market vs a pandemic market?
Higher up the food chain, the OEMs are experiencing a shock to the system, which ripples down to the dealers, vendors, and general public.
Nobody really knows yet how things are going to shake out, but we believe that both new and used cars will get more expensive, bringing the sourcing of used car inventory back into crystal-clear focus.
Also similar, there weren’t a ton of OEM incentives last time around, and if you’re an OEM trying to absorb the costs of tariffs, the incentives could be one of the first things to go.
What are differences in the retail automotive market between tariff times and the pandemic?
First, the supply of new cars is not getting turned off, so we’ll still have new car supply, but much of it will be more expensive, pushing people to more affordable used vehicles.
Second, in-person selling is here to stay. There’s not gonna be any mad rush to digital retailing, which still has yet to live up to its promise.
Third, interest rates are higher now than in 2020, which means higher floor plan expenses, higher monthly payments, and longer loan terms.
Four, there aren’t any stimulus checks yet from the government to spur demand, but who knows, anything can happen.
Five, people can travel freely via all transportation modes, so we’re likely to see less vehicle demand created from mandatory road trips.
Where does that leave us?
Open communication with your customers about what’s happening, why, and how it impacts their upcoming purchase is a great place to start. Making it easy for them to understand affordability is a key component of that.
When it comes to sourcing more used cars, having as many opportunities to source from your market as possible is also critical, whether that be converting more people on your website, launching or refining your buying center, or sourcing from your service department.
And for the customers delaying their purchases, they’ll need more service. Make sure they can figure out what you offer and how much it costs, so that they don’t defect to a quick lube chain or a competitor.
We’re in for a wild ride, and we’re looking forward to it. There’s never a dull moment in automotive.
