The Intersection 1-29-23 | Automotive News

Dealers fear the optimal economic conditions that propelled them to three straight years of robust profits are further eroding.

And though demand for both new and used vehicles is strong, we are seeing and hearing more about how the dynamics of said demand have changed. Thanks to inflation and higher interest rates, cash-strapped buyers are no longer willing and able to entertain paying as much for a used vehicle as a new vehicle.

Franchised dealers are seeing evidence of that. Their concerns about this evolved sales environment take center stage in our print issue this week.

Automotive News conducted its 2023 Dealer Outlook Survey in January. A large majority of the 264 dealers and dealer managers who participated in it — 70 percent of respondents — said higher interest rates are their top worry. A potential recession and vehicle affordability tied for the next most-concerning factor, with about 42 percent of respondents selecting those. Dealers could select up to three top worries.

Affordability also was on the minds of dealers, analysts and company executives at the NADA Show in Dallas, who noted in panels and presentations how the average consumer profile has changed from just two years ago.

All things considered, mixed outlooks prevail.

About 44 percent of respondents fear their profits will worsen in 2023. Nearly 30 percent expect profits will be flat compared with 2022 — a year in which some said their stores earned record profits.

To what degree demand wanes in 2023 remains to be seen. Should a recession arrive, we’ll bring you coverage of how it disrupts dealers’ sales operations.

One thing’s for certain: dealers are battening down the hatches.

— C.J. Moore