One of the biggest keys to success for dealers in the automotive industry is to consistently keep up with their buyers’ preferences. At Mastermind, various tips and tools are available to help dealers maintain control over their salesforce by adapting to the ever-changing behaviors throughout the industry. This is an especially important tactic to maintain in today’s automotive retail space as trends have evolved quicker than ever.
With so many external factors, including ongoing inventory shortages, it’s critical for all dealers to look ahead in order to enhance their ability to market to their audience confidently. By looking at industry trends and data, auto dealers are empowered to navigate today’s evolving automotive market and adapt to changing customer buying behaviors.
In this blog post, we identify the changing auto buyer behavior affecting the industry throughout 2022, including:
· How trends in the automotive industry have shifted in 2022
· Tips for dealers of every size to adapt to the changing market
· Insight into the future and how your dealerships can plan accordingly
As sales prices reach historic highs, interest rate increases ushered in by the Federal Reserve have quickly cascaded to the auto industry.
|Month and Year||Average Vehicle Interest Rate|
According to S&P Global Mobility, the average interest rate on a new vehicle loan rose to 4.8% in May 2022, its highest rate since the 5.3% pre-pandemic (March 2020) rate . This metric quickly climbed, almost a full point from December to May 2022,while sales prices reached historic new highs.
The cost of financing vehicles is high for a variety of reasons, including:
According to TransUnion reports, used vehicles “propel the debt metric,” with average used-vehicle monthly payments rising 22% on a year-over-year basis to $505 in Q1 2022. Still, S&P Global Mobility notes the average APR has risen for the upper-level credit tiers, but not for the lowest tier, including credit scores between 300–600.
Meanwhile, industry reports from Experian also found 62% of all vehicle financing in Q2 2022 was for used vehicles, leading to credit unions, typically able to offer lower interest rates for pre-owned borrowers.
According to S&P Global Mobility, credit unions now offer the lowest average rates in the industry at an average 4.7% APR in August versus 5.4% for captives and 6.2% for banks. With customer demand still high, these economic indicators and shifts away from captive financing could lead to losses, especially when it comes to brand and dealer loyalty.
Captive finance loans represent numerous opportunities to OEMs and dealers, including being historically more loyal when they return to market. According to S&P Global, half of households who originally purchased their garaged vehicle acquired the same brand when they returned to market, versus 63% of lessees. Households who purchased and financed their vehicle through a Captive are also more loyal to the brand when they return to market vs. those who financed through a non-Captive (52.4% vs. 48.2% make loyalty, respectively).
Loyalty customers are:
Due to this, the immediate and long-term opportunities lost by a loyal customer defecting are significant. When it comes to captive customers, however, dealers and OEMs have a distinct return-to-market timing advantage.
The ability to accurately predict exactly when a buyer will be returning to market poses an invaluable opportunity for dealers to proactively engage customers. This is especially important during inventory challenges, empowering dealers to work through financial considerations and delivery delays to pave the path for an exceptional return-to-market and future buying experience.
Tips for Auto Dealers to Adapt
Regardless of how buyers engage with your brand, keeping them informed and connected throughout the entire buying journey in a convenient way is key to delivering an excellent brand experience.
This starts with establishing a transparent customer experience tailored to each customer. Every interaction from that first touchpoint should speak directly to the things your customer cares about most.
These insights also enable dealers to deliver the convenient customer experience today’s buyers expect. Task your team to look for ways to improve the efficiency of the buying experience, including shaving off excessive time wasted repeating data collection and staying one step ahead of your customer using predictive behavioral analytics.
Aim to create a buying experience that takes less than 30 minutes online and less than 60 minutes in-store. While, for many, this may seem unattainable with buyers increasingly expecting ease and convenience, dealers can no longer afford to keep customers in the showroom for a four-hour deal.
Remember, you have a unique advantage over your competition when it comes to engaging your audience: You know them.
Leveraging unique access to insights on their customers’ buying behaviors and vehicle history, these tools enable dealers to predict when their customers will re-enter the market. Meet customers where they are with personalized messaging and a convenient experience designed to retain their business.
For example, some dealers are leveraging advanced dealership marketing tools to serve as an ongoing customer concierge through well-timed service alerts. By staying in consistent communication with buyers, dealers are empowered to create the type of service experience that retains buyers even amid increased competition.
While high customer demand and limited supply have afforded some dealerships the ability to focus solely on their bottom lines in recent months, shifting buying behaviors emphasizes the importance of thinking ahead, since the ongoing car shortage could change buyer behavior forever moving forward.
“Pockets of vehicle inventory levels continue to improve more quickly than expected from extraordinarily low levels and bring welcome news on the supply side of the equation. However, auto consumers are likely feeling the pressure of current economic headwinds,” said Chris Hopson, Principal Analyst at S&P Global Mobility in a recent report.
“While we continue to point to inventory levels as a major factor in stemming immediate-term momentum in auto sales levels, the deteriorating economic conditions are becoming more prevalent.”
High interest rates and low job growth are expected to impact auto demand over the next 12–18 months, according to new reports. In its October 2022 US Economics update, S&P Global Market Intelligence revised its projection of GDP growth in 2023 from 0.9% to -0.5%, with the base forecast now including a mild recession starting in Q4 2022.
As evidenced by the previous two years, dealers need to get ahead of these car buying trends before they cause further disruptions in inventory supply chains.
Leveraging marketing technology powered by predictive technology like Mastermind empowers dealers to achieve sustainable success by staying a step ahead of buyers. Dealership teams can set the tone for an exceptional customer experience when equipped with predictive insights by focusing on the channels and messaging that works for each specific customer.
To do this, Mastermind combines customer data from a dealer’s CRM and DMS with high quality third-party data to build dynamic customer profiles, such as:
The details within these dynamic customer profiles are key for dealers to prioritize and optimize their personalized marketing efforts to maximize their profitability for the long term, while delivering an exceptional customer experience at the same time.
With uncertainty regarding new vehicle inventory, evolving consumer demands and changing buying models, today’s dealers need to rethink the ways they engage and retain buyers to stay competitive.
The data locked away in your DMS, CRM, and sales platform is essential to personalizing your dealership’s sales and marketing efforts. This empowers your teams to confidently engage customers with relevant and compelling messaging appropriate for their stage in their buyer journey.
Proactive dealerships are responding to changing auto buyer behavior by leveraging predictive marketing technology like Mastermind to leverage this data to prioritize their customer outreach, personalize their messaging and maximize their profitability.