Worry about rising health care costs makes retailers cautiously optimistic this year
As dealers head to New Orleans for the National Automobile Dealers Association convention, they're looking forward to this year. But they're concerned about rising personnel expenses, linked in large part to health care costs.
That's the message from an unscientific online survey Automotive News conducted Jan. 8-10.
Of the 145 respondents, 74 percent said they expect unit sales at their dealerships this year to be better or much better than last year. Only 3 percent expect unit sales to be worse or much worse.
Although it starts from a higher sales base, that outlook isn't quite as optimistic as the view two years ago, when Automotive News conducted a similar poll.
In January 2012, 82 percent of respondents expected unit sales that year to be better or much better than in 2011. A similar 3 percent expected unit sales to be worse or much worse.
Profit expectations haven't changed as much. In the latest survey, 71 percent said they expect profits at their dealerships to be better or much better than the year before, compared with 76 percent in 2012.
Some dealers may be anticipating rougher times ahead, just not soon. One respondent to the anonymous survey offered this comment: The Consumer Financial Protection Bureau "could change our business model almost overnight. When you extract finance and insurance income from our dealerships today most are not profitable. The good news is that interest rates should stay low for another year or so. Then, watch out!"
The survey indicates that dealers increasingly are pinning their revenue hopes on used-vehicle operations.
This year 43 percent said they see the most opportunity for revenue growth in used-vehicle sales, while 27 percent cited new-vehicle sales.
In 2012 new-vehicle sales were cited more often, by 39 percent of respondents, while 33 percent pointed to used-vehicle sales.
This year 44 percent said they plan to expand or renovate their dealerships. Two years ago only 37 percent said so.
This year 54 percent said they are adding employees. That's a sharp drop from the 78 percent who said they were hiring in 2012.
Costs appear to be the issue. Asked where they expect costs to rise the most in the coming year, 37 percent of respondents cited personnel and payroll. Their comments made it clear that health care costs are a major concern.
In contrast, in 2012 only 27 percent of respondents cited personnel and payroll. A larger group, 36 percent, said they expected facilities costs to rise the most.
You can reach James B. Treece at email@example.com.