Why this dealer expects the industry to adjust to economic challenges ahead

As the year progresses, auto dealers will need to monitor and adjust their business practices to fit the modern landscape. On this episode of CBT Now, David Kelleher, President of David Auto Group, talks about what he anticipates will affect the industry over the course of the rest of the year.

Economic challenges

As Kelleher participates in dealer boards and the national dealer council at Stellantis, he claims experts suggest a recession is looming within the first quarter of this year. Especially, within the northeast region, Kelleher predicts dealers will feel the effects more. With high-interest rates, Kelleher claims, “it’s from inflation, which is a lack of supply against ferment demand.” He further adds, “people want to spend money so badly because the pandemic set supply chains back.”

Therefore, dealers are looking into the absorption model. The absorption rate or percentage is a metric used by the dealership to assess whether the gross revenues generated by the parts and service departments can “absorb” the total dealer’s overhead costs. Therefore, according to Kelleher, “expanding the used car industry, the market will aid in improving margin earnings” within his stores because new automobiles “sell themselves.” 

Lingering adjustments

"Dealers were set up for success over the past two years, but they will need to make adjustments now that the market is getting back to normal."

If a recession occurs, Kelleher predicts that consumers will favor cheaper-priced new and used cars as well as require more parts and services. As a result, the service department is where David Auto Group’s primary attention is directed.

Kelleher continues, “they should use the lessons they acquired during the pandemic now, but with certain modifications.” Since the market is once again competitive, we’ll have to wait and see what the rest of the year brings.”