It’s been a topic discussed heavily, but wanted to get your thoughts, too. How have rising interest rates impacted dealerships and their floor plans?
It’s really impacted dealers in two ways. Probably the most notable way is the whole purpose of the Fed raising interest rates is to cool off the economy a little bit. With the already high level of costs of used cars, you tack on a rising interest rate so customers’ monthly payments are going up. We’ve certainly seen a slowdown in the dealers sell-through rate. They’re certainly not selling at the pace other historical performance norms would indicate. I think on the front end of the business, the consumer has been impacted with regard to their vehicle payments. So, it’s probably delayed some of those purchases that a consumer normally would have made in a less-rate environment.
I think the secondary impact since we’re talking about floor plans is every time the Fed raising their rates, floor planners, as most companies do, pass those rates on to their customers and in our cases, the dealers. We have to because our underlying cost of funds goes up as well in lockstep with the federal movement.
It kind of hits the dealers on both sides. It’s a little tougher to sell that car to the consumers, and it costs the dealers more to hold that car. It’s not good for the business, I can assure you that.