Source: Auto Remarketing – Like when two friends share a serious conversation over their beverage of choice, EFG Companies is trying to be straight with dealers about their F&I prospects this year.
EFG said through its annual forecast released on Tuesday that it sees the end of record-high front-end profit coupled with external economic challenges impacting the retail automotive, powersports, and automotive lending industries in 2023.Company experts explained that recessionary uncertainty, evolving sales models and compliance requirements, along with continued growth in electric vehicles (EVs) are just a few issues facing dealer principals, agents and finance companies.
As unit inventory and pricing stabilization will bring some relief, EFG predicted that dealership management will face declining front-end revenue coupled with higher borrowing costs and cautious consumers.
Company leaders recommended implementing sales and service best practices with consumer-focused sales models, relying on training, customer education, and value-driven approaches that support the entire lifecycle of the vehicle.
“Full implementation of the revised Safeguards Rule and the potential new rule from the FTC will not be the only challenges requiring dealer time, consideration, money and training,” EFG Companies chief revenue officer Eric Fifield said in a news release.
“Success in 2023 will require dealers and lenders to scrutinize performance across all areas of revenue generation if they expect to come close to the historic revenues banked over the last couple years,” Fifield continued.
Fifield and other executives from EFG Companies emphasized there is room for optimism and revenue generation in 2023, despite a projected decline in sales forecasts and lending volume.
Here is a breakdown of those expectations:
Best practices across the dealership will drive revenue for retail automotive
Scott Kaskocsak, executive vice president of dealer services at EFG, acknowledged that a swirl of economic uncertainty, expensive compliance requirements and unit inventory and floorplan fluctuations will be critical issues facing dealer principals in 2023.
Kaskocsak said savvy managers who focus on best digital and in-person customer service practices in both fixed and variable ops offset unit and gross profit revenue declines.
“Dealers who rely solely on front-end unit prices to make monthly revenue projections will miss out on opportunities to generate solid gains through the combination of F&I product sales and the service revenue those products bring in. Every budget line-item matters in 2023,” he said.
Customer focus across all departments will strengthen defenses and generate powersports revenue
Glenice Wilder, vice president of powersports at EFG, projected that the challenges facing powersports dealers today are largely expected to continue in 2023, with slight changes.
Wilder indicated economic uncertainty, evolving dealership sales models, fluctuating profitability targets, persistent staffing challenges, and continued shortages of powersports parts are just a few of the issues which will impact dealership profitability.
“The smart bet for 2023 is to ‘play all sides of the ball’ by implementing customer service best practices across all departments, with a heavy focus on increasing transparency and communication between taking an order and delivering a unit,” she said.
Nimble agents who deliver what dealers need will rise to the top.
Adam Ouart, vice president of agency services at EFG, stressed that a one-size-fits-all model will not work for F&I agents in 2023.
While many overarching issues will impact all dealers alike, Ouart said agents will need to focus their client service models on delivering the tools and resources that support each dealer’s unique needs, including sales training, compliance support, and creating value-driven product portfolios.
“Commitment to a ‘total cost of ownership’ model will prove invaluable for the dealer’s bottom line,” he said.
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