Providers & Administrators, 1st Qtr 2019

1ST QTR 2019 P A 7 By Tariq Kamal Leaders in the P A segment put their collective brainpower and forecasting abilities to the test as they face the most pressing questions facing the automotive industry and the F I segment this year The past 12 months have shown few signs of slowing for auto dealers or the industry partners who support them In 2018 new vehicle sales topped the 17 million unit mark for the fourth straight year joining a long line of positive economic indicators To get a sense of what to expect over the next 12 months P A reached out to 18 leaders in the providers and administrators segment to learn about their plans and predictions for 2019 THE ECONOMY The U S economy remains healthy through a protracted boom at least as far as the automotive industry is concerned Newvehicle sales closed at 1733 million units on a strong December in 2018 despite the reintroduction of federal interest rate hikes that could threaten affordability and drive more buyers to the used car side which remains flush with inventory As attorney and compliance expert Jim Ganther noted the National Automobile Dealers Association forecasted sales of 167 million new units in 2018 NADA has predicted 168 million new vehicles will be sold this year and Ganther believes they will be surprised again Why First the Trump tax cuts will not be repealed despite some rhetoric suggesting a Congressional effort to do so The fact is those lower tax rates are putting more money into consumers pockets while at the same time increasing our total income tax revenue People with more money buy more cars said Ganther the president and CEO of Mosaic Compliance Services Second the job creation numbers we saw in December surprised everybody That means even more people with more money buying more cars and paying those lower taxes Oil prices are down as well Ganther pointed out encouraging more customers to opt for larger less efficient SUVs and trucks However he warned consumer confidence could easily be shaken by further activity at the Federal Reserve and a recently volatile stock market I see no reason for the Feds recent rate increases Inflation What inflation But every increase makes financing a vehicle more expensive That will create a needless drag on demand Ganther said Bottom line annual sales in 2019 of 17 millionplus Unless the Fed screws it up Jim Maxim Jr president of MaximTrak Technologies and chief digital officer for RouteOne noted the Fed indicated that interest rate increases will taper off this year He believes such restraint will be imperative for sales volume and production which he predicted will be similar to 2018 Maxim has been tracking trade negotiations with China and the government shutdown which was more than 30 days old at press time as well as the performance of the stock market The stock market is key now that we have had a major rebound in early 2019 and if the economy continues to grow we will have a good year he said The economy is very strong and has a positive outlook said Scott Craigmile vice president of sales and marketing for SouthwestRe Many industries are achieving elevated financial results including banking technology and my favorite automotive Craigmile credits tax cuts cheap gas and low unemployment as the chief contributors to a successful 2018 If the job and stock markets remain strong so will the industry Consumer spending which contributes to 70 of the GDP will continue to funnel profit into the automotive industry indicating a strong sales forecast and a positive year for the automotive industry as a whole Craigmile said Glen Tuscan president of Dealer Commitment Services predicted a 5 compression in 2019 He noted that fleet sales and a spike in Tesla sales which delivered more than 180000 new units in 2018 after selling fewer than 50000 the year before may have artificially inflated last years numbers Tuscan also worries slowing interest in some bellwether vehicles could spell trouble for sales in general What concerns me at the early stage of 2019 is the slowing of popular models in the SUV segment such as FCAs Wranglers and other popular models Tuscan said Affordability due to rising interest rates will be a big part of the departure from the retail numbers that we have enjoyed the past few years Rising rates will also impact affordability of F I products To maintain product levels in the business office agents and dealers may need to look at the F I presentation from a new perspective according to Greg Kasprzycki COO of PCMI Corp The younger generation is definitely open to the idea of extended warranty and worry free ownership of the car However the selling process will need to change They will be looking for a total monthly payment which will give them peace of mind that will include the mechanical coverage as well as appearance protection products Kasprzycki said Research shows that F I is going to be a prime growth area in 2019 if dealerships can adjust to rising interest rates sell more product and connect with millennial buyers like never before concluded Neil Brennan vice president of sales and marketing for Vanguard Dealer Services THE INDUSTRY Michael Tuno will track a number of trends affecting the auto retail and finance industry this year starting with the effect changing consumer tastes will have on dealer inventories and factory support