Q4 auto market forecast: The need-to-know trends and predictions

Welcome to another edition of expert insights from the Car Dealership Guy Podcast, a reading companion and episode recap designed to take you a level deeper into the conversation.

In this episode, I talked with David Thomas, Director of Content Marketing at CDK Global, who shares data on everything from EVs to dealership job satisfaction. David, former leader of the Autoblog team, has been covering and researching the auto industry for years. As part of CDK, he delivers top-notch insights into the current challenges facing buyers and sellers while also helping dealers prepare for the future of auto retail.

You can stream the full episode now on YouTube, Spotify, or Apple.

1. Ease of purchase.

CDK’s ease of purchase study was originally started as a way to identify how customers were finding cars when inventory was low (like during the COVID-19 pandemic). Over time, the study has evolved to help measure the customer experience. “We hear anecdotally all the time the negative stories about the dealership experience,” David explains, “so when we put this study out, we thought let’s just have a basic premise and ask buyers ‘Was it easy to buy the car or not?’”

2. The latest results.

Over the last two years, the number of customers who answered “easy” has ranged from 70% to 80%. But recently, scores have risen to new heights. In Aug., the number rose to 93%, the highest on record, with September’s score of 89% coming in a close second. Traditionally, more inventory availability has translated into higher ease of purchase ratings. This year, however, has seen dealer supply stabilize, doing little to move shopper satisfaction one or another. Meanwhile, other metrics, like test drives, are almost always positive, rarely contributing to a shift in score. “So what changed was really the hardest part of buying a car, which is around price negotiation, trade-in negotiation, and credit,” he explains. “And those numbers ticked up, and that’s where we saw that big spike to 93%.”

3. Room for improvement.

The only metric that declined in CDK’s Aug. study was the number of customers who found the vehicle they were hoping to buy. David explains that while overall inventory numbers have stabilized, sought-after brands, like Toyota, are still in relatively short supply. He goes on to clarify that Aug.’s relatively high credit approval rating may have been temporary, noting that the metric, unfortunately, declined back to normal levels in September.

4. The EV market.

One of the biggest challenges facing the electric vehicle (EV market is the lack of product variability. Some new releases have hit the market in recent months: Honda, for instance, has released the Prologue EV, while Chevrolet has launched an all-electric Equinox. These new entries have already helped to drive adoption, especially the Prologue, which David notes is outpacing virtually every other EV from traditional manufacturers. “We’re going to see more products come out,” he predicts, helping to further drive sales in the segment. But the actual buying process still tends to be painfully slow.

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CDK Global - CDK will once again be streaming its annual industry conference CDK Connect 2024 on October 22.

This year’s virtual CONNECT conference will feature CDK’s latest product innovations, a keynote from CEO Brian MacDonald, and live breakout sessions focused across all operations of the dealership.

You can register for CDK CONNECT at the link in our notes below or by visiting CDK.com/Connect.

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5. Why test drives are critical.

CDK conducted a shopper journey study over the summer to identify whether the fundamental basics of car selling had changed from a sales perspective. Most of what it found reaffirmed many of the best practices used in dealerships to this day. For example, 78% of customers said the test drive alone led them to purchase their vehicle, and 86% who take an extended/overnight test drive end up taking the vehicle home, making it an incredibly important step in the sales process. Streamlining the test-drive process is also crucial for success: salespeople should have the vehicle ready and waiting for the customer rather than guiding them through the lot.

6. Test drive specifics.

It’s generally better for salespeople to let customers take test drives on their own, David notes. However, this depends heavily on the age of the buyer. “That is completely skewed by generation,” he clarifies. The younger the shopper, the more likely they are to ride with a sales representative. The older they are, the more likely they are to ride alone. Overnight loans are especially proven to drive sales among older customers, although David acknowledges that it can be difficult to justify for some dealerships due to mileage or theft concerns.

7. Demystifying Gen Z.

While most of today’s consumer research is focused on Gen Z, Millennials currently hold the majority of the shopping power. Although Millennials are behaving differently from previous generations, they’re the age group having the most kids. When it comes to Gen Z, however, there’s a common misconception that gets many dealers into trouble. Many assume that since younger people are more technologically savvy and spend more time online, they don’t want to interact with other people. “All of our research has shown that is not the case at all. They want guidance more than anyone else, and they want it in the dealership…It’s a huge opportunity for the dealership and the salesperson: they are hungry for your knowledge.” Providing that expertise to younger shoppers, both in-store and online through social media (David notes YouTube is the demographic’s preferred platform, not TikTok), is critical to earning their business.

8. What dealer employees want.

CDK also conducted its first study into the dealership employee experience, surveying both current and former workers from the auto retail industry. Most hires, especially those in Gen Z, said that benefits were more important than compensation. Benefits are the number one contributor to job satisfaction and the number one reason why someone would leave their job at a dealership. The second biggest factor in employee retention is work hours, with pay being a distant third. The most important benefits for workers are also surprising: 401k and 401k matching. Those who have worked in the auto industry for some time might not be used to offering these long-term benefits due to the industry’s high turnover rate, but it might be worth revisiting to improve talent retention. “I think a lot of people in this industry are so focused on the dollar…turns out when you ask the employees it’s really these benefits,” David explains.

9. Job satisfaction.

When it comes to overall job satisfaction, 69% of survey respondents had no plans to leave their job, 24% said they were considering moving to a different role, and the remaining 7% planned to leave the car industry entirely (all over the next six months). This means that roughly a third of the entire automotive workforce is looking for a new job. Good managers will always have this number in the back of their mind when dealing with employees.

10. Q4 uncertainty.

Last year, the car industry sold a total of 15.5 million units. Interest rates were higher, and inventory was in shorter supply. Forecasts for this year were more upbeat, and so far, things do seem to be improving. For him, the real question is what will happen in Q4. Interest rates have now declined for the first time in years, which may lead automakers to up incentives in the hopes buyers will be returning to dealerships. Consumers are still unsure about the upcoming presidential election. Stop-sales have been issued for key models. Dealers in key markets like Florida have been forced to close in recent weeks due to hurricane season. Customers will also be looking to replace vehicles lost to the weather. These are all factors that could move the needle in different directions in the final months of 2024.

You can stream the full episode now on YouTube, Spotify, or Apple.

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