EFG Companies sees some market strength and positive economic and consumer trends. But the provider of protection products acknowledged there are ongoing vehicle price concerns and lingering inflation coupled with the heightened political climate.

EFG said those are ingredients that could spell challenges for retail automotive and powersports dealers through the end of the year.

To help, company leaders recommended that dealer principals, agents, and finance companies maintain a customer-focused approach to maximize revenue opportunities while strategically emphasizing education and value.

“While continued high interest rates, consumer reluctance to spend, and election year distractions add an aspect of volatility, dealers have plenty of controls in place to weather this uncertain time,” EFG president and chief executive officer Jennifer Rappaport said in a news release.

“Having helped dealers achieve their sales and profit goals through six recessions and 11 presidential elections, we firmly believe that refocusing on controllables combined with a value-based approach to differentiation will lead to success for our clients in the retail automotive, powersports and lending spaces,” Rappaport continued.

Focus on what you can control

EFG leaders met in June to discuss the wide range of challenges faced by dealer principals throughout its client base. Topics ranged from election, economy, and interest rate uncertainty to the block and tackle of daily operations, like increasing margins on used cars and retraining sales and finance staff.

EFG suggested that dealer principals set aside feelings of uncertainty and focus their efforts on F&I, training customer service best practices, and differentiating their dealerships based on the value provided.

“Volatility is nothing new to our industry, and we’ve all experienced markets like this in the past,” EFG chief revenue officer Eric Fifield said. “When front-end margins shrink, back-end margins must expand, and we believe the best way for dealers to accomplish this is through optimally performing F&I products.

“Our clients’ biggest differentiator right now is the pairing of sales and finance training with our PRU guarantee, which enables dealers to provide better options for navigating the marketplace, positively impacting penetration rates,” Fifield added.

Keep options open to get customers financed

EFG executive vice president of specialty services Brien Joyce pointed out that it’s not been the rosiest times for consumers, especially ones who have been impacted significantly by inflation.

“While The Conference Board did reveal that consumer spending decelerated in the first half of the year, prompting GDP to dip, the impact was softened by a continued strong labor market and strength in the stock market,” Joyce said. “As long as consumers believe their jobs are safe and they can make regular monthly payments easily, they will continue to spend and borrow throughout the remainder of the year.”

Joyce reiterated how critical it is for dealerships to collaborate with their network of financing providers. He cited credit unions and their approach.

“While credit unions have experienced a persistent decline in auto lending versus banks and captives, numerous opportunities exist for lenders seeking to grow their portfolios. Look for options to differentiate, tap into alternative ways to establish creditworthiness, and utilize consumer protection products as protection from default risk,” Joyce said.

“Credit unions are historically more member focused. Take advantage of that perception and work more closely with diverse populations, offer more attractive loan terms, and take strategic risks on emerging opportunities such as EVs and leasing,” he continued.

“Our recommendation for the remainder of the year is to control the things you can and continue to strengthen the member-focused approach that drives value and sets credit unions apart from other lending institutions,” Joyce went on to say.

Reinforce training

EFG also mentioned that challenging conditions also present the opportunity for teachable moments for dealership managers and staff. Jay Gordon is regional vice president of dealer services for EFG.

“We recommend retail automotive dealers set a tone of operating with certainty and focus their efforts on F&I, training customer service best practices, and differentiating their dealerships based on the value provided. We have all experienced challenging markets like this, and volatility is nothing new in our industry. We know that when front-end margins shrink, back-end margins must expand,” Gordon said.

“Fortunately, dealers today have an ace up their sleeve,” he continued. “The new labor force in retail automotive is extremely well-educated and eager to be successful. But for the last four years, dealer sales and F&I teams have had an easy time of it, responding to an eager consumer with COVID cash. They lack the training or muscle memory for selling and generating revenue through consumer protection products.

“Dealer principals now have a great opportunity. Invest in their people and get them trained properly to provide value-based, compliant customer service that drives sales and puts profits on the balance sheet,” Gordon went on to say.

Big-ticket recreation for the win

As with retail automotive, EFG noted the powersports and marine industries also have felt the pressure of inflation-impacted sales.

According to the Conference Board, consumer confidence continues to weaken with persistent concerns about inflation, causing consumers to hold off on purchasing homes and vehicles. However, buying plans for big-ticket items like appliances, smartphones, and vacations increased.

EFG senior vice president of agency services and powersports Adam Ouart explained that this sentiment should bode well for a market that caters to recreational pursuits. Ouart recommended that dealer principals take advantage of this pursuit of fun and lean into value-focused opportunities.

“As we move into the dog days of summer, my thoughts drift to a sandy beach or a mountain trail complete with a jet ski or 4×4 utility vehicle,” Ouart said. “However, I don’t think this is going to be the year of the big getaway. Our powersports and marine industry have a lot of challenges on their hands this summer. Ongoing price concerns and lingering inflation coupled with a heightened political climate have created challenges that cause a negative overhang for both consumers and dealerships.

“To stay positive, dealers need to maximize online sales engagements, focus on localized financing and alternative creditworthiness measures to help secure the best interest rates available for your customers and cultivate a team of top performers by securing the best talent and reinforcing training for all team members,” Ouart continued.

EFG offered more recommendations to help dealers for the remainder of the year and beyond via this website.