|
The theme of this year’s National Automobile Dealers Association convention was “Vision for Tomorrow.”
That vision for the new-car business remains cloudy, but the outlook for used cars brightens by the day.
The convention’s exhibit hall reflected the changed landscape. There was no giant display from General Motors Co.; in fact there was no display at all.
Manheim CEO Dean Eisner reflected on the past year saying the downturn caused many long-simmering issues to come to a boil.
“I don’t think the economy created all the ills that we saw,” Eisner said. “It certainly magnified and exposed them.”
Used-car sales gained even more importance for franchise dealers due to the upheaval and uncertainty.
“It often made the difference between staying in business or going out of business,” said Manheim chief economist Tom Webb.
All dealers, franchise and independent, faced the same challenges in 2009 – a lack of capital and a lack of inventory.
The capital markets show some signs of life on the consumer credit side. Companies such as AmeriCredit Corp. and GMAC Financial Services said they plan on growing originations this year.
But most doubt finance sources will return to the freewheeling ways of the last decade.
“Further industry consolidation is likely in 2010 and those who access to capital, and have good systems and management, will prosper, while those who don’t will fail,” said Ken Shilson, founder of the National Alliance of Buy-Here, Pay-Here Dealers.
Inventory may be somewhat easier to obtain.
More new-car sales will mean more trade-ins. There have been more sales into the rental fleets, as well.
These gains will be offset by a decrease in off-lease volumes starting in the fall.
Webb expects leasing to pick up this year.
“You have an increased ability to lease and you have an increased desire to lease,” he said.
Another wholesale segment that should decline is repossessions.
There was an increase in default rates last year as job losses, as well as salary and wage reductions, squeezed consumers.
Better collections practices and high auction prices lessened the net loses.
Shilson expects a continued focus on tight underwriting for buy-here, pay-here dealers, as well as other better practices.
“The capital shortfall in 2009 forced prudent operators to reduce leverage and increase financial flexibility,” Shilson said. “This trend hopefully will continue n the future even as the capital markets re-open.”
Webb said the economy is in recovery. The rate of that recovery depends on several factors he said, but trends are moving in the right direction.
Many dealers saw higher profits despite lower sales in 2009, Shilson said, a result of improving their operations.
“It is apparent that more changes are needed for some in order to adapt to the new economic conditions,” Shilson said. “Operators who understand these changes will prosper, while others resist them.” |
