As the 2023 camping season begins, I have been talking with dealers who have been through the industry’s ebbs and flows for many years. They said this year is similar to some seasons past, but in some ways, they are not similar at all.
The industry seems slow to gain traction for the season. Most dealers are confident they will see an uptick in buyers.
These dealers’ comments deepen because they see a fundamental industry change. In years past, the industry consisted of family-owned businesses able to tuck in for cover when things got tight. The businesses could buckle down on their expenses, inventory and floorplan.
Now, with so many big-box retail operations having 10 or more rooftops, those businesses may find tightening up in slow times much harder.
Another difficulty many dealers are discussing is consumer financing. Twenty years ago, only the big stores had a business office. Now, a finance office is the industry norm, and dealers rely on this department to be a major contributor to the bottom line.
The concern over financing starts with the increase in finance rates. Consumers are finding that interest rates have risen enough to increase monthly payments beyond customers’ budgets. Many consumers who have bought in the past four years find today’s interest rates a bit of a shock.
During the pandemic, consumers lined up to buy the RV closest to their needs. The consumers paid retail pricing, and then some, and put the minimum down to purchase their RV. Now, these consumers want to trade up, but their payoff has put them in a negative equity position. Because these customers are underwater on their current loan, their balance to finance is increasing. Lenders’ underwriters are asking for more money down, sometimes much more, hoping to correct the carry of the loan to a realistic number.
Another consumer financing concern is customers’ credit scores. In the past, a 700 credit score was typically plenty to ensure loan financing, but now may not automatically qualify a deal. Lenders’ underwriters are diving deeper into consumers’ history and payment record. Underwriters are being more disciplined on the credit, finance amount and risk as they review loan approvals.
One way to help combat higher interest rate challenges is to involve the business manager early in the deal. Remember, the business manager should receive 100% turnover at the point of sale to help steer financing through these obstacles.
Dealers’ inventory floorplans present another challenge. As in the 1980s, floorplan financing seems to be a growing concern. Interest rates back in the 1980s were 18% to 20% or more on dealers’ floorplan. Dealers today are being cautious about their inventory. As everybody knows, curtailments are no fun.
Deliver the Value
As delivery month arrives, remember, staying focused on presenting the value to the consumer will be more important than ever.
Do you recall the definition of a sale? A sale occurs when the value exceeds the cost by one cent.
Then, a transaction takes place. The salesperson, business manager and sales management team are responsible for delivering value exceeding their consumers’ expectations.
Your team should provide value to the customer, value in the RV, value in the dealership and value in the deal.
Another Cycle in the RV Industry
Yes, this is just another business cycle in our industry. However, this business cycle is in uncharted waters compared with years past. This time around, the RV industry could face some serious issues compared with past business cycles.
To start, numerous exceptionally large dealership groups have large, nationwide footprints. What would happen to the industry if one of these huge dealership groups failed? How would their failure affect the remaining industry dealers?
Interest rate increases show no sign of slowing down. These rising rates affect everybody and everything.
So how can your dealership thrive and survive? By focusing on your people.
Implement ongoing training programs and ensure everyone attends. Train on these practices until they become natural.
Second, stay focused on the processes and procedures involving every square inch of the store. Make sure your processes and procedures are efficient and customer friendly. Most of all, ensure your employees support these policies and procedures as if they were their very own.
In closing, to overcome the challenges of today’s marketplace, stay focused. Remember, you can control only what you can contribute to. Remain positive, even if you find doing so difficult. Stay aware of the business cycle around you yet perform every day as if all is well.
During the busiest time, remain disciplined and focused on what is happening in your store. Have a strong delivery month.
Greg Artman is the national training manager for Diversified Insurance Management, a Higginbotham company. He spent more than 20 years in the automotive, RV, powersports and marine industries as a finance training and managing representative, of which the last 17 years have been with Diversified Insurance Management. He worked as management in numerous dealerships.
