NADA Day 2: EVs, F&I Pressure, Stability and an Opportunity

January 30, 2023

Not so long ago, some observers questioned whether dealers would want to sell and support the rise of electric vehicles (EVs) given their long-standing history and investment in selling and servicing vehicles with internal combustion engines (ICEs).

I’m not sure why anyone thought this could be the case. From conversations with several dealers at NADA today, it’s apparent to me that dealers want to play an active role in putting, and keeping, EVs on the road. The big question, of course, is the nature of the role dealers will play in EV sales, and the requirements OEMs are putting on dealers’ shoulders to support EV sales and service.

A CFO from a large Southeast dealer group told me that he came to NADA with a two-pronged mission—try to figure out the smartest next step to support the group’s OEM partners as they supply a larger share of EVs, and the investments the group should make to meet the needs of vehicle buyers who want to complete at least a portion of their new/used vehicle purchases online. “Those are the two big things that are going to reshape our business,” he says.

The CFO shared another item of interest—how to spiff up service waiting areas when a growing number of customers “aren’t interested in watching TV or reading magazines.”

Here are a few other nuggets from the exhibit floor:

F&I Income: Dealers have been seeing a rise in all-cash deals over the course of the past year or more. It’s a trend analysts expect to continue due to high interest rates. Some dealers estimated all-cash deals accounted for 15 percent to 20 percent of their retail vehicle sales. The trend effectively eliminates the opportunity to book finance interest/reserve income and sell gap insurance and other products. It also makes every F&I office visit, and presentation, more important.

Vendor Stability: NADA marks the time when many dealers revisit their dealer management system (DMS) providers. I spoke with several dealers who aren’t happy with their current DMS partners. “We didn’t get what we signed up for,” the operations VP for a Florida-based group shared. The problem: The group’s current provider merged with another company, causing disruption. I asked a Southwest dealer in a similar situation if he’d consider one of the newer players in the DMS space. “No,” he told me. “We don’t want to be the pioneer who takes all the arrows. We need stability.”

Vehicle Quality Advantage: I spoke with a dealer who attended an NADA workshop that featured an analysis of online reviews for CarMax, Carvana and Vroom. The dealer said the analysis affirmed something we all know—that consumers really like a digitally enabled purchase process when it’s easy and smooth. But the analysis also apparently revealed that dealers do a better job of managing/responding to online reviews than the other companies, and dealers tend to see comparatively fewer complaints about vehicle quality, thanks to their focus on used vehicle reconditioning. “That’s an opportunity,” the dealer shared. “We don’t really tell our customers about how we recondition our cars and why.”

That’s a wrap from Day 2 at NADA here in Dallas. It’s time to get some rest and get ready for Day 3.