Optimism High Among Auto Dealers

The economic and retail sales growth expectations of independent auto dealers have improved substantially, according to the National Independent Automobile Dealers Association’s (NIADA) business confidence survey for the fourth quarter of 2017. The survey of NIADA members is conducted each quarter in partnership with Equifax to gauge the viewpoint of used vehicle dealers regarding general economic conditions and business concerns.

Fifty percent of the dealers surveyed said they expected economic conditions to improve in Q1 2018, up from 36 percent in the Q3 survey. Retail sales growth expectations improved from 55 to 67 percent, and the number of dealers who expected to increase their inventory investment this quarter rose 17 percentage points, a 42.5-percent increase from Q3.

The results align with a recent survey of members of the National Federation of Independent Business that showed optimism near an all-time high, at a level not seen in 34 years, according to NFIB president and CEO Juanita Duggan.

The big drivers of that renewed positivity include expectations of tax relief from the new tax bill passed by Congress, positive consumer sentiment due to the lowest unemployment rate in more than 30 years and confidence in the current administration’s pro-growth, anti-regulation policies.

Used vehicle inventory costs remain robust, with the latest Manheim wholesale pricing index up 7.8 percent from the prior year at 134.5.

That inflationary inventory situation continues to put pressure on the business expense side of the ledger, which is one reason 57 percent of dealers expected their cost of doing business to increase, up from 45 percent in Q3. That jump also reflects the significant investment independent auto dealers continue to make in their digital showroom-as reflected in the survey, which shows 56-percent planned to increase their digital marketing spend.

The expectation of rising expenses also showed up in dealers’ perception of the single most important problem facing their business-25-percent said it was the increased cost of doing business, by far the most popular choice. It was followed by heightened competition from franchise dealers (17 percent) lack of customer prospect traffic/leads and lack of quality retail inventory (12 percent).

Significantly, government regulations/red tape, usually one of the most popular responses, was near the bottom of the list at 6 percent.

The overall picture shows NIADA members expected business to improve heading into the new year, optimism bolstered by strong 3.9-percent holiday retail sales growth-well above the 10-year average of 2.6 percent-as well as rising wages, stock market strength, increasing employment and a generally positive economic outlook.

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