The Federal Reserve raised short-term interest rates by 25 basis points today. That was widely expected. Indeed, according to the Q2 2018 Cox Automotive Dealer Sentiment Index released earlier this week, dealers are already feeling pessimistic about the rest of the year due to expected interest rate hikes, rising costs, and rising inventories.
An interest rate hike hits the retail auto industry on several fronts. Consumers pay more for a loan, dealers pay more for flooring, and for manufacturers the cost of providing low-cost financing rises.
Coupled with likely rises in the price of some goods due to the ongoing trade dispute, consumers are looking at higher costs for the rest of the year. That will make used vehicles look better than new cars to some. Indeed, franchised dealers surveyed in the CADSI remained optimistic about used car sales.
Used car sales are the focus of some startups that aim to remove the dealer from the equation. This week, I talked with the founder of a startup that aims to keep the dealer at the center of the transaction but provide a platform to make it easier for the consumer to buy a new car from that dealer. A dealer using Joydrive, the platform, says she loves it. Learn more here.
A couple of years ago I talked with Tony Rimas, managing partner of Fraser McCombs Capital, a fund focused on automotive technology startups. This week I talk with Tony again about where dealerships fit into the evolving auto retail world. He sees a place for dealerships but cautions that dealers must find ways to make themselves relevant. Read more here.
Transaction News! Need I say more?