There is no doubt that the last year has been a journey, but it is one that has only proven the strength of car dealers and consumers alike. Both have shown remarkable resilience even as the auto finance market continues to change due to outside circumstances such as COVID-19 protocols.
The following is an analysis of this year’s auto finance market in 2021 and what it means for your dealership.
The State of the 2021 Automotive Finance Market
While the auto finance market has had plenty of fluctuations throughout the last year, there are still plenty of opportunities for success. Here is a summary of what you need to understand about the state of the automotive finance market in 2021:
1. Dealerships have been impacted.
As the pandemic hit consumers and dealerships alike, manufacturers have worked to offset its impact through low to 0% APR programs, which has turned more customers toward loans rather than leases.
This data and analysis have been collected through the IHS Markit, whose pie graphs reveal that returning customers who have chosen to lease again have dropped 8% in a few short months, from 75% to 67%. That 8% drop in leasing has meant an 8% increase in loans. Another chart from the same site reveals that there has been a 3% increase in customers purchasing their vehicle instead of leasing.
2. Buying preferences have changed.
Pre-owned vehicles are more popular than ever before, reflecting a decrease in new vehicle stock at dealerships, as the pandemic continued to affect the finances of consumers. As the buying preferences of customers have changed, dealerships need to reflect this change and shift their marketing strategies.
As the market changes, it becomes critical to not just address these changes but also prepare for them. One way is by increasing profits through finance and insurance (F&I) opportunities in order to maximize your bottom line.
3. Consumers have adopted digital retailing.
With the spread of COVID-19 and the regulations put in place to help stop its spread, schools turned to online teaching and some jobs turned remote. On the same note, consumers turned to online purchasing, prompting dealerships to quickly adopt digital retailing.
According to the IHS Markit, social distancing has changed the customer’s journey as the latter completes their research and transactions online. This has accelerated the customer’s purchase activities while changing the direct sales model as a result.
This online approach to purchasing vehicles has also led to a change in how F&I services are handled. F&I plays an important part in increasing dealership revenue, so it is more important than ever to learn how to leverage it and drive home profits.
State of the Auto Industry in 2021 and Its Impact on Dealerships
A study done by NADA at the beginning of the pandemic in 2020 fully reveals the impact of digital retailing on dealerships and their profits. This study only drives home the importance and profitability of F&I, which has increased significantly by a whopping 58% through digital retailing. This is in comparison to the F&I profits at traditional dealerships, which are only 35%.
Consumers have learned to adapt to the pandemic, and now you must too.
We can help. Contact us today to learn more about how your dealership can maximize profitability based on updates in the state of the auto finance market in 2021!