In a market as unpredictable as a roller coaster ride, automotive professionals must continually adapt to survive. However, used vehicles are on the rise. Nate Myers, Used Car Director of SONS Automotive Group, joins us on today’s episode of Inside Automotive and discusses strategies and trends he’s seeing with used cars.
Key Takeaways
1. Nathan Myers describes the current automotive market as highly volatile, akin to a roller coaster ride. This volatility means dealers need to adopt flexible strategies to navigate the ups and downs. While certain segments, such as full-size and luxury SUVs, are more susceptible to weekly changes, other segments, particularly sedans and compact SUVs, are expected to remain strong. This stability is attributed to sustained high gas prices, which boost demand for more fuel-efficient vehicles. Myers suggests that these segments will likely continue performing well throughout the year, emphasizing the importance of market-specific strategies.
2. Myers notes that the EV market’s dynamics vary significantly by region. In Atlanta, there’s a greater openness to EVs, leading to more frequent purchases and trade-ins. However, in places like Montgomery, Alabama, the preference still leans heavily toward traditional gas-powered vehicles. This regional disparity highlights the importance of understanding local market preferences. Additionally, Myers points out the need for dealerships to understand and utilize tax credits associated with EV purchases, as these can offer financial benefits but also complicate the buying process.
3. The interview highlights significant disruptions in the trade-in market caused by past trends of overvalued new car sales. With new vehicles previously selling well above sticker price, many consumers are now facing severe negative equity—owing more on their car loans than the cars are currently worth. This has made trade-in negotiations more challenging, with some customers being “upside down” by as much as $10,000 to $15,000. Myers compares this situation to the housing market crash of 2009-2010, where consumers were forced to hold onto their properties longer than anticipated. Dealers now need to manage these delicate situations, often explaining to customers why their cars have depreciated so much.
4. Higher interest rates have had a noticeable impact on car financing. Myers reports a decline in finance penetration, with more consumers opting to pay cash or secure loans through credit unions not affiliated with the dealership. This shift poses a challenge for dealers who traditionally relied on in-house financing as a significant revenue stream. Additionally, higher rates have led to stricter lending criteria, resulting in more consumers being unable to qualify for loans. This, in turn, affects the overall sales volume and necessitates dealers to find new ways to accommodate and assist potential buyers.
5. There has been a marked increase in higher mileage vehicles entering the used car market. Myers observes that cars being traded in today often have significantly more miles compared to a few years ago. This trend is partly due to advancements in vehicle technology, which have led to better-built cars that consumers can comfortably drive for longer periods. Myers specifically states that brands like Kia and Hyundai have improved in quality and are now viewed as reliable long-term vehicles, contributing to higher mileage but still retaining value as trade-ins. This means that vehicles with over 100,000 miles are now more common and dealers still consider them viable inventory if they pass safety inspections and meet quality standards.
"The current automotive market is like a roller coaster ride. Some weeks, you're up, some weeks, you're down. It's all about having the right strategy and navigating one day at a time." – Nathan Myers
