Part 1: Rising Interest Rates and Increasing Inventories Are Anticipated to Remove the Unlikely Profit Center
Compared to last year, interest rates have significantly increased since the Federal Reserve began raising rates in March 2022. Inventories have also improved as the industry works through its supply chain issues. These shifts in economic trends are expected to have an impact on many aspects of auto dealer operations. In this week’s post, we talk about floorplan interest income and pose some important questions: What is floorplan interest expense, and what are floorplan credits? How have floorplan credits turned into an unlikely profit center for dealers? Can we expect this trend to continue amid changing conditions?
How the Pandemic Darling May Have Flown Too Close to the Sun
Lately, Carvana has been in the news for all the wrong reasons. Its share price is down over 90% since its pandemic peak and currently sits below the low levels of March 2020. This post provides an abbreviated history of Carvana from its founding in 2012 to 2022 and discusses what its successes and struggles mean for traditional auto dealerships.
Large Dealer Groups Continue to Invest in the Franchise Dealer Model, Managing Their Dealerships as Portfolios
It’s earnings call season again. Themes from the Q1 2022 earnings calls were affordability issues, managing stores as a portfolio, the health of the franchise dealer model, and who repairs electric vehicle components and what that means for dealerships. All this against a backdrop of the continued inventory shortage makes for an interesting post. Read more here.
The March 2022 SAAR was 13.3 million units, down 5.3% from 14.1 million in February and down 24.4% from March 2021’s SAAR of 17.6 million units. This drop in the SAAR is a product of several factors. We dig into the low magnitude of the seasonal adjustment and ongoing supply chain issues in this post.