By Alexander Martinez, MetaMartini, WTC Select Committee Member
Earlier this year, the Federal Reserve raised federal funds rate by .75 percentage points – the largest in nearly three decades. This decision to combat inflation adds yet another layer to the impact retail sales have with the wheel and tire industry. Over the past 24 months, the increasing complexities of supply, demand, cost of product, hiring shortages, and sheer consumer interest in the market has caused many regulatory committees to try and solve the problem of what will stabilize the market. However, a steep hike in federal funds rate can, and likely will, impact your business in the coming months.
For businesses that prioritize new vehicle outfitting, this federal funds rate increase may hinder consumers to pull the trigger on a new auto loan. This is the intention of the hike: To help slow down demand. However, this may also leave your business experiencing lower interest in those new-vehicle products. We recommend prioritizing existing customers that have not converted at this time to weather the short-term pull-back in the market.
For businesses in the aftermarket outfitter space for used vehicles, this may also impact conversions due to the market's growing affinity to lending solutions versus pure cash sales. During this time, we recommend educating customers on how all forms of purchasing channels exist for your business, including four-payment installments, lease-to-own, and shorter-term regular financing, if applicable. Staying connected to your bolt-on financing companies is crucial to ensure customers are understanding how these changes may impact their purchase.
As the domestic market continues to evolve in 2022, the WTC is committed to sharing the necessary information and recommendations to continue supporting the various customers within your market through unbiased and educational information.