For an industry that’s always changing, Liza Borches, president and CEO of Virginia-based Carter Myers Automotive, argues that trust and transparency have to be consistent.
“It’s an industry that I Iove, but it’s one that’s always evolving,” Borches told Mega Dealer News of reports that for the first time since the Great Recession, average U.S. new car dealers operated at a financial loss in 2018. “The model we have right now makes it difficult to know the actual cost of the vehicle and what the dealership stands to make from the transaction.”
Forbes reports after adding the income from all dealership departments such as new cars, used cars and service and parts, the typical dealer lost around $13,000 last year, which amounts to an over $400,000 decrease in overall profits when compared to five years earlier.
The lean times have forced many dealerships to kick their survival instincts into overdrive, including entering into “strings-attached” financial incentive laden arrangements with various automakers.
With more and more consumers also favoring online shopping sites, dealers have likewise been forced to lower retail margins in an effort to remain as competitive as they can be.
Finally, as average new car prices have jumped over the last five years by an average of $5,000, or to just over $36,000 overall, dealers have been forced to lower margins as a way of keeping monthly payments affordable enough to still attract buyers.
“It’s great for the customer, but as dealerships we still have to find ways to make sure we can pay assistants and invest in people and facilities,” added Borches, who declined to say what percentage of new car sales currently constitute what share of Carter Myers’ business. “It puts a lot of pressure on everyone to make sure proper revenue is coming in.”
Borches said the struggle is nothing new for most dealerships as they desperately seek to adjust and keep step in an industry that’s always changing.
“I think it's critical that manufacturers and dealers are able to come together with a solution that works for everyone,” she said. “Now, there’s too little transparency. Some of us are just selling cars hoping and praying numbers come in. If we want a long-term, stable industry we have to be able to have trust with each other. I see a couple manufacturers going down the right path, but a lot more needs to be done for us to get there.”