Welcome to another edition of the Car Dealership Guy Podcast Recap newsletter—the key lessons from top operators, founders, and execs shaping the future of auto retail.
Today’s guest is David Thomas, Director of Content Marketing at CDK Global.
We get into why dealership's ease of purchase is crashing right now, why credit denials are racking up, the fate of the EV market post tax-credits, and much more.
Purchasing a car got tougher in June.
The ease of purchasing a vehicle took a sharp turn.
“Lately, the past six months or so, the number of people saying it's easy to buy a car has been in the 90%, really high, the highest we've seen. And then this month in June, that number plummeted to 77%, which is not only the biggest drop we've ever seen, it's the lowest number we've seen since we started.”
Consumer credit has been a huge contributor to the increases in challenges associated with purchasing a vehicle.
Credit problems have a domino effect.
The number of people saying that they were challenged by credit for June fell 10 percentage points to 53%—impacting several parts of the car purchasing process.
“Once that happens at a dealership and someone has an issue with it, that throws off how much the car is going to cost if their interest rate's not as low as they thought it was going to be...So the time they spent at the dealer during June was higher.”
All these things have a cascading effect.
Assessing credit through the right lens is important.
Credit might seem like it’s stable—but it has been low historically.
“…You have to remember that most car shoppers are coming in after three or five years…, thinking back to three or five years ago, and it was much easier to get credit back then.”
The challenges many consumers face with credit aren’t like other indicators in the market; it tends to be multilayered.
The EV market is a lot stronger than most think.
Most electric vehicle owners like their EVs.
“…82 % of EV owners say they're going to buy another EV. They are locked in to that technology. So if you just take current owners, you're gonna get four out of five of them coming back, looking for another EV.”
69% of non-Tesla buyers indicated that they are always going to keep a gas car with their EV.
Presented by:
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Assessing the EV market without the tax credit.
The EV market will continue to grow—even if the federal tax credit goes away, which it likely will.
“That's going to hurt, but growth will continue. It just won't be as large a growth path. The curve won't be as steep. The sales aren't going to accelerate as quickly as everyone thought, but they're still going to sell.”
A growing product mix of EVs will also help to grow the market—with affordable vehicles like the new Kia EX4 and Nissan Leaf coming online this year.
Dealers need to be preparing for an EV world without federal incentives.
Although no definitive time has been set for ending the federal EV tax credit, it’s coming.
“There have been a number of dates. It started off being the end of the year, December 31st. Then we heard a September time frame—and some people are saying it's going to happen the second the ‘Big, Beautiful Bill’ is passed, which could be in July.”
Inventory, marketing—dealers should be assessing these factors and more to make the necessary adjustments.
The elimination of federal EV tax credits could drive a new trend in the space.
With the change in tax incentives, some direct-to-consumer brands might decide to go the dealership route.
“They might need a financial off-ramp where they're not outlaying all the money on the facilities and other things. Somebody like Rivian, Lucid, Polestar…I would kind of think that a lot of those might revert to a dealership…I wouldn't be shocked if one or more of them decide to go the dealership route.”
It would be tougher with a brand like Scout because of its ties to Volkswagen—but the move could help some other direct-to-consumer EV brands grow.
The U.S. is the last great car market.
America is not steering away from cars—as some other countries face several challenges with vehicles.
“When you look at some other demographic stuff, we're driving a trillion miles more than we were 20 years ago…We're up to over three-trillion miles of road that we travel in the US. We hear it every 4th of July, but they said it again this 4th of July—more people on the roads than ever before. 72 million people are going to get out on the roads for the holidays.”
The U.S. is car culture, “1000%.”
The car market is only going to grow.
A key demographic group is poised to drive a major shift in the car buying market.
“…When you look at the demographics…this year is the largest graduating class of high school seniors ever…It’s not necessarily a population—but they're getting their high school degree…What that means is they're 18 now and in 10 years that's prime car buying time.”
Annual sales could get right back to 17 million if the economy straightens out.
More people are going to need new vehicles in the near future.
“The average age of vehicles on the road is a testament to the quality of the cars being built. I don't think people want to hold on to them that long. I think that's just what's happening. And I mean, that's over two generations of vehicle.”
The tariffs are gonna make all cars more expensive…but everything's more expensive
