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On the Point

Fasten Those Seatbelts

With a major slowdown imminent, Da Man says it’s time to ditch those new-age theories and get back to the basics.

December 6, 2016

Did you hear those loud thuds? That was the sound of car sales hitting the wall in September and October. It’s the first week of November, and sales don’t look great this month, either. It’s amusing hearing people blaming the slowdown on pre-election jitters. Once it’s over, they say, everything will be great again.

By the time you read this, the election will be over. I’m willing to bet sales didn’t spike up. Hey, I’ve been calling this sales dip for nearly a year now. Now analysts and manufacturers are beginning to accept that the market is reaching saturation. Kelley Blue Book warned 2016 sales will fall short of 2015 levels, and Ford reluctantly admitted U.S. sales are off 10%.

I’ve also warned since May that used-car values were going to take a hit in the fourth quarter. Now many dealers are up to their necks in inventory they should have turned for a short loss. Of course, your pre-owned manager swears he can sell his way out of it.

General Motors took the first hit. And it has been doing some fancy footwork ever since, transferring its losses to dealers as a glut of over-residualized off-lease and fleet units return to the market. Now Ford, Toyota, and Fiat Chrysler are facing the same dilemma.

It’s hard to feel bad for the OEMs. They created this problem, and it’ll be the dealers who will once again bail them out. But like always, the executives responsible will be replaced with a new crop of geniuses who will repeat the same mistakes.

I’m also hearing about increased credit turndowns. I just read that only 30% of credit scores submitted for vehicle financing and leasing are above 620. And I bet you’ve noticed that it’s getting harder to get deals approved as called.

Delinquencies are inching up, but it’s not out of control. My take is finance sources are nervous about their exposure to extended-term financing. In fact, I’ve noticed Ford Credit, Wells Fargo, and Ally taking a more conservative approach.

But that hasn’t stopped OEMs from coming up with new leasing programs and even goofy timeshare ownership programs. We’ve also seen BMW, Toyota and Ally experimenting with used leasing, which is a great short-term solution until those puppies start coming back with greater frequency. Then again, manufacturers have never had long-term visions when it comes to retail. They are reactionary.

So what’s the answer? Well, here’s advice I gave when the market crashed in 2008: “You can grow or you can die, but you cannot stay where you are. If you’re going to do business in the coming years, you’re going to have to take that business away from a competitor.”

I just can’t wait to see these new-age prophets and their theories crash in this competitive market. Several of the former large public companies have tried every goofy-ass concept these false prophets have come up with. Their stock is now tanking. I just wonder what they’ll do when they face a real slowdown?

So, yeah, we’re going to see dealers choking on that Kool-Aid these tech vendors have been serving up. I just hope your store wasn’t talked into firing the F&I department so sales can handle that function, or, worse, convinced F&I products can be sold online.

What’s funny is everyone is whining about how hard it is to keep good people. Well, you can thank these new-age geniuses for talking dealers into cutting payplans. Now people can’t make a decent living anymore.

It’s about to get real, folks. It’s time to train and pay your people. It’s time to get back to the basics. It’s also time to tune up your technology and live or die by your website and CRM. It’s also time to measure everything, and fire vendors that don’t deliver. That’s right. Throw all these new-age theorists, nut cases, and nonproducing vendors out. And whatever you do, don’t contract with any vendor or service just because they get co-op from the manufacturer. If it’s crap, it is still crap. So don’t buy it just because it’s half-priced crap.

We’ll get through this like we always have. Personally, I only see a slowdown, not a crash. That means you have to be better than you’ve been, and I don’t think there’s a dealer out there who can say his or her organization is operating at full capacity. So fasten your chin strap and check your seatbelt, because you’re in for a bumpy ride. Keep those emails and phone calls coming.

Jim Ziegler is the president of Ziegler SuperSystems Inc. Contact him at [email protected]

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Author Bio

Jim Ziegler

President & CEO of Ziegler SuperSystems

Jim 'Da Man' Ziegler joined the magazine in 2011 to deliver his On-the-Point message about the car business to dealer principals and store managers. He'll offer strategy advice on everything from sales and F&I to marketing in the digital age. Catch him every month at www.fi-magazine.com.

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