Tax season comes around yearly, bringing familiar trends and fresh obstacles for car dealerships nationwide. This year echos last year’s patterns, with some dealers seeing surges in new vehicle sales due to attractive rebates, while others confront issues like low stock, static interest rates, and struggles getting buyers approved.
Tax Season’s Impact on Dealerships
Many franchise dealers experience significant new car sale spikes, mainly attributable to generous manufacturer rebates aimed at attracting buyers. An Alabama franchise store owner/principal stated, “Our secondary department enjoys a good tax season. But our new car department slows a bit now as our affluent customers pay taxes, so that business will rebound in weeks.” Echoing this, a Louisiana dealership reported an “influx of new sales due to incentives,” underscoring how rebates can shift consumer behavior then.
New Vehicle Sales Patterns
The boost in new vehicle purchases isn’t universal though. For affluent customers who typically frequent certain franchise dealers, tax season can mean short-term increased buying power as they receive refunds. However, this uptick is fleeting, with sales tapering until spring transitions to summer. This cyclical effect highlights tax season’s nuanced impact across market segments.
Challenges Persist in Secondary Vehicle Market
While new vehicle sales may seem strong, the secondary market paints a contrasting picture. A Michigan franchise dealer laments, “There’s a severe vehicle shortage. Customers haggle constantly over higher interest rates.” This succinctly highlights two major hurdles: vehicle scarcity and climbing interest costs. The semiconductor shortage has intensified the lack of available vehicles, hampering used and secondary sales, especially in rural regions.
The subprime market faces particular strain. Dealers serving credit-challenged buyers struggle mightily, as affordable auction inventory dwindles, failing to meet consumer demands. Meanwhile, static rates spur pricing conflicts, deterring potential purchasers from committing under less favorable financial terms.
Independent Dealers Confront Extra Obstacles
For independent dealers, challenges mount even higher. Many report uncharacteristically sluggish business, compounded by tax refund delays that historically buoyed seasonal purchases. Vehicle scarcity persists as a pervasive problem, further exacerbated by unchanging interest rates that discourage consumer spending.
A recent dealer survey we did (click here to share your thoughts) via email across all our dealer client base and prospective client base provides a clearer depiction of the current landscape. Approximately 66.7% of dealerships report not experiencing a prosperous tax season, a significant majority indicating widespread challenges. About 25% of dealers indicate that this year is a repetition of the last, signaling that patterns of consumer behavior and market conditions have not changed, and only 8.3% of dealerships are encountering above-average sales this April, a small segment that likely benefits from specific local circumstances or particularly effective sales or marketing tactics.
How We’re Adjusting
Faced with these challenges, we are adjusting our approach in the 32% and 68% of car buying markets to combat these conditions. Our approach focuses on acquiring potential buyers likely to purchase. This reduces reliance on costly second or third-party leads that convert less. Arbor’s Business Development Center (BDC) is key. By engaging directly with potential buyers, scheduling appointments, and guiding the sales process, the BDC streamlines the path to purchase. Enhancing customer experience while increasing sales efficiency allows dealerships to focus on closing deals instead of sorting leads.
The BDC engages customers directly, schedules appointments, and guides them smoothly through buying. This streamlines the path to purchase. It improves customer experience and sales efficiency so dealerships concentrate on completing sales rather than sorting through leads. Arbor’s strategy acquires likely buyers. Eliminating dependence on less-converting second or third-party lead sources.
Conclusion
As dealerships navigate tax season’s opportunities and challenges, this year reinforces adapting strategically is crucial. While rebates and incentives drive some new car sales, issues persist like vehicle shortages and static interest rates – especially challenging secondary and third-party markets. For dealerships aiming to thrive amidst complexity, embracing innovative strategies could provide the key to success.