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Auto sales have faced slightly downward pressures so far in 2019, especially in April where U.S. auto sales declined 2.3 percent1 despite having an extra selling day in the month and having the benefit of the spring selling season as an added incentive for car shoppers.
With the monthly data, the annualized pace of sales dropped to 16.41 million1, below the estimates most industry observers pegged for the year closer to the 16.8 million mark. A year ago the annualized pace of sales was registered at 17.25 million.
The mood and outlook of independent dealers has not fared any better than the data when you take into account a few key areas of their business.
According to the first-quarter confidence survey for the NIADA, approximately 14 percent of independent dealers said they expect retail sales to decrease, up from just five percent of sentiment in the previous quarter.
Fewer independent dealers (33%) are looking to expand their business, down from 40 percent from the previous quarter. What’s more, 14 percent expect their cash flow to decline, up from just three percent in the previous quarter.
This is a result of 26 percent of Independents saying that economic conditions represent the most important problem facing their business today.
Aside from the business operations, many Independents are feeling the effects of consumers who appear to have worked through years of pent-up demand. What’s more, higher borrowing costs are also placing pressure on consumers and their appetite for vehicles.
Interestingly enough, the Buy-Here-Pay-Here (BHPH) activity of their business has experienced a significant jump to 44 percent of their retail automotive sales during the first quarter from tax season activity, up sharply from 29 percent the previous quarter.
In terms of staff levels, fewer independent dealers say they plan add staff in any of the key areas of the dealership: sales, finance, or service.
One new area dealers find themselves grappling with is fraud. There are a number of different types of fraud dealers now need to be cognizant of, but according to the latest NIADA confidence survey, only income verification fraud has risen as a concern among dealers from the previous quarter. According to the data, as many as 50 percent of independent dealers surveyed said that income verification fraud is what they see most during transactions, up from 34 percent the previous quarter.
Fraud is such a growing concern that it was reported in early May that Wisconsin Governor Tony Evers has signed a law that cracks down on fraudulent car sales in the state. To address this growing concern, many independent and franchise auto dealers are leveraging new technologies and resources to aid in the battle against income and employment verification fraud, identity theft, and synthetic ID fraud.