Cox Automotive’s Tom Webb said earlier this year that buy-here, pay-here dealers were in a “better position.” Then a few weeks later, Ken Shilson with the National Alliance of Buy-Here, Pay-Here Dealers highlighted how “bad news could be good news for BHPH.”
More upbeat assessments arrived on Monday as the latest installment of the National Independent Automobile Dealers Association's quarterly Business Confidence Survey reflected immense optimism from independent used-vehicle dealers regarding retail sales, consumer traffic, profitability and economic conditions.
The survey, conducted in partnership with Equifax during the first quarter of this year, showed confidence in all of those areas was up substantially from the previous quarter and year-over-year.
Nearly two-thirds of respondents (63 percent) indicated they believe the economy will improve in the next quarter, a significant increase from the previous survey, in which only 34 percent expected economic improvement, and the 36 percent of Q1 2016 — that year’s highest percentage.
Just 2 percent said they expect the economy to decline, down from 22 percent in the Q4 survey.
It’s the first time since Q3 2015 that a majority of survey respondents have expressed a positive outlook on economic conditions.
That optimism is reflected throughout the survey. More than half (53 percent) of the respondents plan to invest in more retail inventory, up from 41 percent in the previous survey, and 54 percent expect to hire new sales staff (up from 32 percent), as 70 percent anticipate retail sales to grow (up from 46 percent) and 71 percent expect customer traffic to increase (up from 36 percent).
On the financial side, the percentage of dealers expecting cash flow to improve (57 percent, up from 34 percent) and credit availability to expand (32 percent, up from 23 percent) over the next quarter was also sharply higher.
“A degree of optimism is always expected with a new year,” Equifax vice president of dealer services John Giamalvo said, “but this level of widespread positivity is unprecedented for this survey as dealers seem primed to ramp up their businesses and position themselves to capitalize on expected opportunities in the year ahead.”
NIADA senior vice president Scott Lilja said it’s no coincidence that the rise in dealer optimism came in the first survey taken since Donald Trump took office as president.
“Certainly the ‘Trump Effect’ has helped drive this newfound enthusiasm in the market,” Lilja said. “The proposed regulatory and tax overhauls promised by the new administration have helped improve the mood of dealers who have long been inundated with federal and state regulatory measures and overly complex tax policy.
“Should some of that burden be lifted by the new administration, the cost of doing business could be substantially reduced,” Lilja added.
Lilja and Giamalvo said other factors driving anticipated retail sales and customer traffic growth include an increase in used vehicle inventory available to meet consumers' ever-shifting needs and the average price differential between new- and used-vehicle average transactions, which hit an all-time high of $11,000 in Q4 of 2016, both of which are expected to bring former new car buyers to independent used car stores to find more affordable transportation.