Column: Dealers facing a very different year ahead

Rising interest rates, affordability, headwinds, anxiety. 

Those aren’t necessarily the first words rolling off people’s tongues at the NADA Show. Dealers are coming off three years of making more money than ever before. Business has generally been good throughout the industry. 

But those themes are cropping up in conversation after conversation at the show with dealers, vendors and those who track the health of the auto business. 

After close to three years of protracted inventory shortages related to the coronavirus pandemic, new-vehicle supplies are starting to recover. Good news, but the flip side is that the pricing power — and profit boosts — dealers have enjoyed will ebb as their lots fill back up. 

And worries about the economy and the possibility of recession are growing. Dealers in particular fret that persistently high vehicle prices and spiking interest rates are putting a dent in consumer demand.

The steep jump in rates is a big change since dealers last gathered in March 2022 in Las Vegas.

“The last time all these people got together, money was still free,” Stephen Dietrich, a dealer lawyer and partner with Holland & Knight in Denver, told me.

The market is taking a hit from those higher borrowing costs. Cox Automotive Chief Economist Jonathan Smoke links 2022’s 10 percent decline in used-car sales principally to the rate rise.

And there’s not much prospect for relief as the Fed is not done raising rates, Smoke told Automotive News. That means “you’re going to very much be catering to the people who can buy.”

For dealers, it means that watching costs and finding affordable cars to stock their lots is paramount.