ATLANTA—Auto dealers are not optimistic about the future of auto sales for the remainder of 2018, even as they are saying they do expect showroom traffic to increase in the coming months, according to a new report.
According to the National Independent Automobile Dealers Association (NIADA), only 39% of dealers expect economic conditions to improve over the next quarter, down slightly from the previous quarter, noted Equifax, which recently completed a study that shows 49% of dealers expect customer traffic to increase over the next quarter. The company said the study indicates that dealers are expected to get more creative with preapprovals and credit checks.
The Equifax report found that 52% of prospective purchasers have undergone a credit check, while just 15% have the intention of getting pre-approval on their desired vehicle. “Even more interesting, nearly a third (32%) said they do not plan to seek approval during the shopping process,” the company said.
“Clearly, dealers can play a larger role in helping or encouraging preapprovals, which may create a less adversarial environment when it comes to negotiation as well as a more expedited shopping process,” Equifax said.
Too Much Focus on Prime
Most dealers surveyed by NIADA (40%) say that tighter restrictions to qualify buyer loans are a major factor making it more difficult to secure loans for their customers.
“The concern today is that dealers and lenders today are more focused on prime opportunities,” stated Equifax. According to the most recent Equifax credit trends data (through March 2018), 1.37 million auto loans have been originated this year to subprime consumers with a VantageScore 3.0 credit score below 620. This is a 7.3% decrease from March 2017. These newly issued loans have a corresponding total balance of $24.1 billion, a 6.8% decrease year-over-year.
“As lenders consider which loans to approve, they are increasingly using new analytic tools that widen their opportunities and better understand which dealers offer the best potential for their book of business,” Equifax said. “With these tools, both dealers and lenders can maximize their showroom traffic and transaction opportunities, even in subprime scenarios.”
‘Doesn’t Have to Be Gloom & Doom’
"Despite 2018 so far showing much resilience in an auto industry that's showing slipping auto sales activity, many experts believe end-of-year sales will still fall a little short of last year's totals," said John Giamalvo, vice president, dealer services at Equifax Automotive. "The message and opportunity here is that this doesn't have to be doom and gloom for dealers and lenders. Analytic tools and fundamental strategies should be maximized to both maximize showroom traffic in pre-approvals, and generate more risk-friendly transactions with subprime opportunities."