ARLINGTON, Texas — The economic and corresponding retail sales growth expectations of independent auto dealers were a bit more subdued in 2018 than a year before, according to the National Independent Automobile Dealers Association’s business confidence survey for the first quarter of 20.
The survey, taken in the first quarter of 2018, found 42 percent of the respondents said they expected economic conditions to improve in the quarter ahead, down from 63 percent in the 2017 Q1 survey, while retail sales growth expectations fell to 50 percent from 70 percent a year ago and 67 percent in the previous quarter.
In addition, the percentage of dealers who expected an increase in their cost of doing business rose from 57 percent in the fourth quarter of 2017 to 66 percent, despite the tax reform bill passed in November.
Optimism for increased cash flow and availability of auto finance resources also fell, with cash flow down 21 percent and finance availability down 34 percent from the previous year.
That was due in part to a sharp pullback in auto finance company investment in the subprime paper market – a handful of independent auto finance companies left the market completely.
In fact, dealers cited less access to the number of lenders as well as tighter restrictions to qualify buyers for loans (29 percent each) as the top reasons why it’s been difficult to secure loans for customers.
Expectations of more consumer traffic dropped to just 41 percent from 71 percent in Q1 of 2017 after a negligible .02 percent year-over-year increase in consumer retail sales in the first quarter.
That could be the result of a delay in tax refunds, prompting households to put off spending early in the year. However, tax withholding was reduced to account for the new tax cuts, which might lead to more spending down the road.
The expectation of rising expenses also showed up in dealers’ perception of the single most important problem facing their business – 22 percent said it was the increased cost of doing business, more than any other issue. Concern over the lack of auto finance resources rose from single digits throughout the past year to 12 percent.
The overall picture shows NIADA members expected business to stay steady with no major uptick in customer traffic or corresponding sales heading into the mid-year of 2018.
Two major factors are likely to dictate the outcome of this quarter: The availability of auto finance resources and consumers potentially opening their pocketbooks as they see the benefits of the new tax law on their household budgets.
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SOURCE: NIADA press release