Everyone knows that a recession is coming.
Wait, you knew that a recession was coming… right?
Anyway, the signs are everywhere: the ongoing war in Ukraine, supply chain issues across the board, and many countries in Europe are already experiencing stagflation. Here are 4 keys to preparing your dealership for a recession.
In times before a recession…
Some 81% of U.S. adults are worried about a recession hitting this year, according to the CNBC + Acorns Invest.
It wasn’t just Covid-19 that caused Americans to panic. A December 2019 survey from the National Association for Business Economics found that 48% of respondents said they expected a recession in 2020.
So, what can you do to prepare your dealership for a recession?
There are four key things:
Key #l: Diversify Your Inventory
In a way the car market is recession-proof. People will always need to get from point A to point B. But that doesn’t mean that people won’t be holding off on big purchases like new or luxury cars during a recession.
“Diversifying your inventory is key,” says Eric Lyman, chief industry analyst at ALG, a subsidiary of TrueCar. “You don’t want to have all your eggs in one basket.”
That means having a mix of both new and used cars, as well as a mix of different price points.
“If you only have luxury vehicles, you’re going to get hit hard in a recession,” Lyman says. “But if you have a good mix of economy vehicles and entry-level vehicles, you’ll weather the storm a little better.”
Key #2: Offer More Leasing Options
During a recession, people are going to be more cautious with their money. They may not have as much to spend, and they may be worried about losing their job.
“That’s why it’s important to offer more financing options,” Lyman says. “Leasing can be a good option during a recession because it gives people the flexibility to get a new car without having to commit to a long-term loan.”
Although leasing will get hit the hardest at first due to high gas prices and the frozen credit market, it will eventually rebound as people start to feel more confident about the economy.
In fact, if you look at the 2008 recession this is exactly what happened. Leasing returned with a vengeance in 2010 and 2011 as people started to feel more comfortable about the economy.
Key #3: Get Rid of Unnecessary Costs
During a recession, every penny counts.
“You need to take a hard look at your expenses and see what you can cut,” Lyman says. “Do you really need that fancy office? Do you need to have a coffee bar in your showroom? Can you get by with a smaller staff?”
The one place you want to focus your efforts on is marketing. “You need to be visible during a recession,” Lyman says. “You need to let people know that you’re still open for business.”
You’ll have to make tough decisions during a recession but make sure you prioritize marketing; especially digital and social media marketing.
Key #4: Focus on Customer Service
During a recession, people are going to be even more price-sensitive than usual.
“Your customers are the lifeblood of your dealership,” Lyman says. “You need to focus on giving them the best possible experience.”
That means being upfront and honest about pricing, being flexible with financing, and going above and beyond to make sure they’re happy with their purchase.
“If you can provide a good customer experience, you’ll be able to weather the storm,” Lyman says.
These are just a few of the things you can do to prepare your dealership for a recession. If you take the time to plan ahead, you’ll be in a much better position when the economy takes a turn for the worse.
For more helpful tips, be sure to check the rest of our blog at Leasly!