F&I and Showroom, March 2014

Letter From the Editor After consulting the experts the editor remains optimistic about the changing relationship between dealers and todays Internet shopper By Gregory Arroyo W hat a difference fi ve years makes I mean the last time I was in New Orleans for the National Automobile Dealers Association NADA s annual convention the talk was about how bad things would get as the economy slipped further into the Great Recession Were obviously coming out the other side but everyone I talked to seemed to be looking beyond what this year holds Yes hitting that 16 million unit mark will be nice but our discussions centered on the future of auto retail And just about everyone expects 2014 to be a year of major change In terms of what could be an infl exion point I would say Id be shocked if it wasnt 2015 says Raj Sundaram executive vice president and group president of Dealertracks Dealer Solution business unit But mark my words 2014 might surprise us with respect to some of this stuff I asked Sundaram whether we had reached a point at which dealers would embrace the change todays pluggedin hypereducated Internet shopper is driving But before I get into that any further let me update the status of our recovery Lets start with the NADAs new chief economist Steve Szakaly He lists rising home values residential housing construction and employment as proof the economy has found its footing Those indicators double as factors driving his prediction of 164 million new vehicle sales for 2014 Melinda Zabritski senior director of auto fi nance for Experian Automotive believes theres plenty of evidence that the auto fi nance industry 6 F I and Showroom March 2014 has recovered But what really has her convinced is what she sees happening outside of the prime segment The biggest thing I tend to look at is the percentage of subprime fi nancing And as a category yes were there she says And the biggest growth driver outside of prime is what we classify as nonprime the lower risk portion of subprime Annual depreciation is Black Books Ricky Beggs recovery indicator of choice and unfortunately its showing that were not quite there yet Last year annual depreciation for two to six year old cars came in at 128 up from 124 in 2012 and 77 in 2011 This year he expects annual depreciation to be around 135 which isnt too far off from the prerecession level of 15 Were going in the right direction Beggs says noting that vehicles coming back as trade ins reveals that consumers are beginning to return to normal trade cycles But getting into 2015 and the early part of 2016 I think well be at that full 15 Beggs also believes that inventory levels for those subprime geared eight to 11 year old vehicles are beginning to recover from the governments Cash for Clunkers program which removed about 750000 of those vehicles from the market It also turned those 2000 wholesale vehicles that were huge players in that segment into 4000 or 5000 units Well Beggs believes wholesale pricing for that vehicle segment should fall to about 3000 to 3500 this year Bottom line were not there yet but were close That wasnt the last insight I gained from my visit to Black Books NADA booth Before meeting with Beggs I sat down for a chat with Mike McFall president of the companys Activator Division We talked about a question that was spreading throughout the exhibit hall Did AutoBytels purchase of AutoUSA in mid January signal the death of the lead generation business McFall described that theory as a mischaracterization of the situation I think its changing in a very interesting way though And I think what Autobytel is saying is We need to be more than just a lead provider we need to be a marketing services provider He believes that tech vendors and even dealers are realizing that the best source of leads in terms of conversion is a dealerships own website And what companies like Black Books Activator Division Autobytel and Dealertrack are aiming do is make your sites better lead converters by offering plug ins and features designed to drive a better customer experience In other words simply allowing customers to search your inventory isnt enough anymore especially considering how much you already spend on search engine optimization and paid search to drive customers to your site With the investments dealers are making in digital marketing you need to have higher conversion rates Dealertracks Sundaram said Were offering them tools that will help them drive that Folks theres a lot going on right now Change is happening so keep your eyes and ears open The good news is that it looks like vendors want that change to happen on your sites The Future Is Now