{"id":6591,"date":"2025-11-25T21:12:52","date_gmt":"2025-11-26T03:12:52","guid":{"rendered":"https:\/\/niada.com\/dashboard\/?p=6591"},"modified":"2025-11-25T21:41:05","modified_gmt":"2025-11-26T03:41:05","slug":"optimism-among-uncertainty","status":"publish","type":"post","link":"https:\/\/niada.com\/dashboard\/optimism-among-uncertainty\/","title":{"rendered":"Optimism among uncertainty"},"content":{"rendered":"\n

From the November issue of UCD<\/a><\/p>\n\n\n\n

Recent headlines have caused some trepidation in the used vehicle market, as sales have slowed, major players have filed for bankruptcy and delinquencies are on the rise.<\/p>\n\n\n\n

Though there are concerns, lenders and floor planners are still working with dealers to supply capital to keep business going in the current market. Justin Makinson, Assistant V.P. of Finance and Lending at NextGear and Thomas Hawkins, President of CAR Financial Services, Inc., shared their views on the current market, lending and the future.<\/p>\n\n\n\n

Perception of the current market<\/strong><\/p>\n\n\n\n

There are reasons to be cautious for dealers and lenders in today\u2019s market, with uncertainty in several areas \u2013 employment, trade, interest rates, inflation and consumer confidence.<\/p>\n\n\n\n

It also points to a market correction after the COVID-19 pandemic, which in the aftermath, brought extra money to the market and higher consumer spending. Now, many consumers have been forced to tighten their belts with higher prices of consumer goods and other factors, including the federal forbearance on student loans expiring.<\/p>\n\n\n\n

\u201cThe market is stabilizing in the post-stimulus era,\u201d Hawkins said. \u201cThe return to normal consumer performance has caused pain to lenders who may have overextended credit or terms to the consumer base beyond what they could sustain without stimulus.  This has caused some consolidation and price correction in the market over the last 18 months.  Thankfully, it appears that underlying asset prices are finding a steady foundation, and good operating dealers have adapted their underwriting to account for current economic conditions.\u201d<\/p>\n\n\n\n

Makinson agreed that it\u2019s not all doom and gloom and some promising signs are being overlooked.<\/p>\n\n\n\n

\u201cThere\u2019s certainly optimism in the market, but most are labeling it as \u2018cautious optimism,\u2019\u201d Makinson said. \u201cInventory levels are rising slightly while sales are beginning to slow, which is typical seasonality as we enter the fall. Dealers have tariff-related concerns and are waiting for the Federal Reserve to make further interest rate reductions.<\/p>\n\n\n\n

\u201cAt a macro level, the stock market is doing well, unemployment is still low, and we have strong GDP growth. Many consumers are waiting on the sidelines while the Federal Reserve continues to consider lowering rates through the end of 2025. There\u2019s likely a strong pool of buyers ready to re-enter the market as interest rates continue to fall.\u201d<\/p>\n\n\n\n

Credit availability for dealers<\/strong><\/p>\n\n\n\n

There has been widespread concern about credit availability in the aftermath of the Tricolor bankruptcy. But Makinson and Hawkins said their companies are not pulling back funding.<\/p>\n\n\n\n

\u201cWhile other floorplan companies may be starting to tighten in some areas, NextGear Capital remains committed to smart, sustainable growth with independent dealers,\u201d Makinson said. \u201cThis includes growing with existing clients and helping new clients scale their businesses. We are staying focused on long-term performance and helping our clients navigate the ever-changing landscape of the automotive industry.\u201d<\/p>\n\n\n\n

Hawkins added: \u201cWe all see more caution in lending, which is what naturally happens when underlying asset values decrease.  That said, I believe there is still good financial opportunity and access to capital for good operators from those of us who continue to buy or lend in all market cycles.\u201d<\/p>\n\n\n\n

Key measures to consider<\/strong><\/p>\n\n\n\n

Under the changing market conditions, lenders are still looking at many of the same metrics in making decisions on credit.<\/p>\n\n\n\n

\u201cAny lender is going to look at the standard financial indicators, and we\u2019re no different,\u201d Makinson said. \u201cThese are always helpful metrics, but some of our primary considerations are dealers\u2019 ability to sell units and generate positive cash flow. These are key indicators of their operational health and traction in their local markets.\u201d<\/p>\n\n\n\n

Historical performance is also under more scrutiny.<\/p>\n\n\n\n

\u201cWe look for dealer longevity in the market, for dealer LTVs to make sense, solid contracts and consumer documentation, and solid payment histories,\u201d Hawkins said. \u201cJust like CAR Financial, dealers with long tenures in the business have seen multiple business cycles and understand how to adapt underwriting to current economic risk.  These attributes, along with access to capital, provide the best chances for continued success.\u201d<\/p>\n\n\n\n

Steps to protect lending relationships<\/strong><\/p>\n\n\n\n

Dealers should be focusing on solidifying their collections and underwriting principles to not only increase cash flow but also make them more attractive to lenders. They also should be looking to diversify and cultivate multiple business relationships.<\/p>\n\n\n\n

\u201cSuccess will come to those who have properly adapted their underwriting and have access to multiple capital channels,\u201d Hawkins said. \u201cIn the last several years, we have seen much consolidation in the market.  Dealers should make sure they have multiple avenues to access capital for ongoing operations and growth.  They should be cultivating relationships with companies with strong histories within the industry.  Dealers should keep updating their underwriting to keep the consumers in manageable contracts, all while using technology to aid in efficiency and performance.\u201d<\/p>\n\n\n\n

As with any business relationship, communication remains vital. Keep your lender updated on any issues.<\/p>\n\n\n\n

\u201cStrong lending relationships are built on transparency, consistency and performance,\u201d Makinson said. \u201cDealers should focus on running disciplined, well-managed operations that demonstrate reliability to their lenders. That means staying current on obligations, maintaining clear and proactive communication, and showing a consistent ability to turn inventory efficiently.<\/p>\n\n\n\n

\u201cIt\u2019s also important for dealers to stay agile in today\u2019s market, such as adapting to shifts in consumer demand, leveraging data to make smarter buying decisions, and using technology to streamline operations. Lenders value partners who are not only financially sound but also forward-thinking and resilient. By staying focused on fundamentals and being open to innovation, dealers can strengthen their credibility and ensure continued access to capital. NextGear Capital continues to look to expand relationships with clients in all phases of their dealership journey, including those who are just getting started as well as those who have been established for many years.\u201d<\/p>\n\n\n\n

Looking ahead<\/strong><\/p>\n\n\n\n

No one knows for certain what the next year will bring, especially with so much in the air on the geopolitical front. But the upcoming tax refund season, with larger returns expected, and the possibility of lower interest rates, gives a reason for some optimism.<\/p>\n\n\n\n

\u201cI\u2019m optimistic about the remainder of 2025 and 2026.   There will be an opportunity for those positioned to serve the market,\u201d Hawkins said. \u201cSome challenges remain in legacy portfolios, but newer originations look promising as most dealers have adapted to the current environment.  Additionally, interest rates have begun to decline, aiding the consumer as well, along with the stabilization of asset prices.  The longer those trends stay in place, the more opportunity for everyone to thrive.\u201d<\/p>\n\n\n\n

Makinson points out that amid the uncertainty of tariffs and the current government shutdown, employment remains high, and the need for reliable transportation is as important as ever. Quality used vehicle dealers are needed to fill that demand. \u201cWith the cost of new vehicles likely continuing to rise due to tariffs, used vehicles remain an increasingly reasonable alternative,\u201d Makinson said. \u201cFalling interest rates from Federal Reserve actions should help support vehicle sales, and gas prices trending lower this fall should boost consumer confidence over the coming months.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"From the November issue of UCD Recent headlines have caused some trepidation in the used vehicle market, as…\n","protected":false},"author":1,"featured_media":6592,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"csco_singular_sidebar":"","csco_page_header_type":"","csco_appearance_grid":"","csco_page_load_nextpost":"","csco_post_video_location":[],"csco_post_video_location_hash":"","csco_post_video_url":"","csco_post_video_bg_start_time":0,"csco_post_video_bg_end_time":0,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[11,3],"tags":[],"class_list":{"0":"post-6591","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-inventory-floor-planning","8":"category-industry","9":"cs-entry","10":"cs-video-wrap"},"_links":{"self":[{"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/posts\/6591","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/comments?post=6591"}],"version-history":[{"count":0,"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/posts\/6591\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/media\/6592"}],"wp:attachment":[{"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/media?parent=6591"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/categories?post=6591"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/tags?post=6591"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}