Reset and Retool: Dealers Meet 2025 With Resilience For auto retail dealers hoping for a return to normal conditions and predictability in 2025, disruption has once again taken the driver’s seat. As trade dynamics shift and their impact on the economy remains unclear, auto retailers will need to call upon their adaptability to adjust to a new set of conditions. Strong profit growth since 2019 and resilience through COVID suggest that dealers are ready to reset and retool to address today’s market. Thankfully, dealer average profitability has stabilized at nearly double the rate achieved in 2019. The most successful auto retailers will be able to maneuver to build value without shortchanging growth strategies or slowing their work. As you reset your plans for the coming years, consider the following industry trends. CONSUMER DEMAND WILL CARRY ON Auto retail demand depends on the strength of the consumer, and by most measures, the U.S. consumer is relatively healthy. Savings rates are up, as are wages. Consumer spending patterns haven’t changed. Auto financing is holding strong. The percentage of people not paying their credit card bills is low. Taken together, consumer measures point to steady demand for vehicles. Additionally, millennials and Gen Z are entering their prime years for buying cars and trucks, surpassing the baby boomers as drivers of demand. Consumers have adjusted to vehicle prices that have risen 30% over the past seven years, with a marked increase in new, used and fleet sales that have carried over from 2024 into the first part of 2025. STRENGTH IN THE USED CAR MARKET OFFERS GOOD NEWS FOR DEALERS There’s been a surge in used car demand, and we can expect even more as the year unfolds. For some time now, we’ve seen that consumers are especially interested in buying late-model used cars and trucks, keeping these values high. Higher new car prices, combined with rising insurance premiums for more expensive vehicles, nudge more buyers toward the used vehicle market. With the threat of expanding tariffs, inflation or supply chain disruptions, new car prices will be pressured further, pricing more customers out of the new car market and driving them to buy used. Enterprising dealers are already starting to get ahead of the demand surge by boosting their strategies to acquire used vehicles. Dealers can look to gain a competitive edge by sourcing a favorable mix of cars at an attractive price and marketing them to consumers who have become more accustomed to purchasing in the used car market. Combining vehicle sales in a hot and profitable used market with financing or protection products will provide even more support for dealer margins. PRICING TRANSPARENCY BENEFITS BUYERS AND DEALERS ALIKE The spike in digital shopping and purchasing has catalyzed the longer-term shift toward more transparent pricing. Retailers have tried to make it easier for customers to see exactly what a vehicle will cost them so they can determine how it will fit within their budget. That transparency applies to used car trade-ins as well. With a better understanding of the value of their current vehicle, consumers know in advance how Tariffs and Their Impact on the Economy Will Test Dealers’ Resilience By TRUIST DEALER SERVICES 18 Virginia Auto Dealer
RkJQdWJsaXNoZXIy MTg3NDExNQ==