Ever since the US Department of Defense (DoD) issued clarifications to their interpretive rule of the Military Lending Act (MLA) regarding allowable automobile financing arrangements for members of the military in 2016 and 2017, automobile dealer trade groups have been vociferously lobbying for a reversal of the rulings. At issue is the fact that under the new interpretation of the MLA, dealers cannot roll the costs of gap insurance into the financing arrangements made available to members of the military.

In issuing the new guidelines, the DoD appeared to have decided that add-on financing products like gap insurance represented a form of predatory lending designed to extract maximum profits from servicemembers without regard to their ability to service the resulting loan. Although there are always examples of unscrupulous dealers taking advantage of lax regulations, that prohibition is almost certain to cause far more harm than it prevents. Here's a look at the MLA and how the revised interpretive rule is undermining the intent of the law in today's auto finance market.

The Goals of the MLA

The MLA, at its core, is a law that's all about making sure that members of the military enjoy protection against dubious and predatory financial products. Part of that is just a reflection of the respect and reverence that they're owed as the protectors of our nation, but there's also quite a bit of motivated self-interest involved on the part of the DoD. By acting to shield members of the military from undue financial risks, the DoD also prevents those members from becoming vulnerable to extortion attempts based on their financial condition.

That's mission critical in an environment that deals heavily in national security secrets where the risk of information theft is so high. It's also why members of the military that fail to live up to financial obligations often face disciplinary action or expulsion from the armed services. The prohibition on financing add-on products like gap insurance stands in direct opposition to the law's intent, as it exposes members of the military to greater financial risk, with negligible benefit – at a time when those risks are only growing.

Lengthy Loans More Commonplace

In recent years, there has been a steady increase in the average loan term for new vehicles purchased in the US. At present, that average has reached an eye-popping 69.03 months, with a full three-quarters of loans clocking in at 61 months or longer. For dealers, that represents an industry that's adapting to the changing financial needs of consumers, but for the consumers themselves, it means something very different: a greater risk of being underwater on their auto loan for longer than ever before.

That's significant because it means that add-on products like gap insurance are actually more important than they've ever been, as a means of mitigating consumers' risk of loss in the event of an accident or theft of their vehicle. It's difficult to understate the level of risk, but for illustrative purposes, consider that negative-equity trade-ins have set new records in recent years. That means that a big chunk of borrowers remain underwater for the life of their loan.

Restoring the Balance

The average car buyer doesn't stop to consider the cost of things like gap insurance when they calculate car payment amounts in the search for a new vehicle. That's why it's important that dealers have the flexibility to help buyers attain such coverage by including it into the financing of the vehicle at the time of purchase. Preventing military members from having that option almost guarantees that they'll be exposed to unnecessary financial risk, which is certainly not consistent with the intent of the MLA. There have been some signs recently that the DoD may be moving to undo this unnecessary and unwise prohibition, and that should be welcome news to both dealers and servicemembers. If it happens, it will restore some much-needed balance to what otherwise is a laudable effort to protect the men and women of our military from undue financial burdens.

It's been a difficult few months for car dealerships in much of the US. Almost all of the major automakers reported a decline in sales in July, and there's little reason to believe that it's a trend that's going to reverse itself anytime soon. That's because the underlying factors that are causing the drop-off aren't easing, and in fact, may be worsening.

The nationwide sales figures from July represent the product of a perfect storm in and around the market. Interest rates have been climbing, cutting into the buying power of those looking to purchase a new car. To make matters worse, an oversupply of nearly-new pre-owned vehicles has reduced the value of the trade-ins that many buyers use to finance a new vehicle. Combine those factors with the decision of the major automakers to cease some critical cost supports and reorganizations in anticipation of a looming trade war, and you have a recipe for continuing declines.

Any way you look at it, US auto dealers are going to need to run a tight ship to continue to thrive over the next few quarters. Fortunately, there are some things they can do to cut costs and drive more sales in this challenging environment. Here are the best tactics to employ.

Control Costs

Rising interest rates aren't only affecting prospective buyers by sapping their purchasing power, they're also causing difficulties for dealers that over-aggressively expanded while access to capital remained inexpensive. In some cases, that means that outstanding loans used to upgrade facilities when sales were booming may come back to haunt dealerships now. Before the rates rise any further (and they will), now is the time to refinance debts with a fixed-rate business loan to lock down ongoing expenses. Also, if there were plans for costly new expansions, reevaluate them to make sure there's an unassailable business need to complete them immediately. If not, put them on hold.

Reduce Friction

In a market where buyers will need more encouragement than ever to complete a purchase of a new vehicle, the best thing that dealerships can do now is get out of the way. That means working to remove anything in the purchasing experience that might be a turn-off to a prospective buyer. One of the best ways to do this is to cross-train employees to fill multiple roles in the dealership. That way, an interested buyer can complete a purchase without any delays, like waiting for a finance representative. When a purchase might be touch-and-go, every moment they buyer has to consider it further might be all it takes to change their mind.

Focus On The Buyer's Situation

One of the best ways to increase sales in a market where purchasing power is hard to come by is to lean into the customer's individual situation. For example, a monthly vehicle payment that is fifty dollars higher today than it was last year might be a stretch for some buyers. To combat that, be ready with the kinds of information that could help them to justify the cost. For example, know the differential in mileage between the car you're selling and the customer's current vehicle. Translate that into actual savings based on their regular driving habits, to demonstrate that they could actually be saving money, despite the higher monthly payments. If the customer has an older vehicle, make sure to account for the difference in expected maintenance costs, too.

Hang In There

Once you've cut costs, increased efficiency, and realigned your sales tactics, all you can do is keep on working and try to ride out the current slump in auto sales. The good news is that while the slowdown probably won't end in the very near term, it's unlikely to persist for more than a year or two while the economy readjusts to higher interest rates and recent changes to the tax code. At that point, wages should start to rise, and that should usher in higher demand for new vehicles. Until then, hang in there.

Everywhere you look, in every corner of the world, luxury automobile sales are booming. It's not showing any signs of slowing down anytime soon, either. Industry analyst Technavio estimates that the global luxury cars market will continue to grow at a CAGR of 12% through 2022, making it one of the hottest automobile sales sectors in recent memory.

That growth means that luxury automobile dealers will find no shortage of willing buyers in the coming years. It doesn't mean, however, that those dealers won't have to work harder than ever to make sales. The reason that luxury automobile dealers have their work cut out for them is due in large part to a better-educated consumer class and a shift in the expectations of luxury buyers everywhere. To make the most of the current sales boom in the luxury automobile market, here's what dealers need to know.

Empowered Consumers

It should come as no surprise to any competent auto dealer that customers come through the doors today knowing quite a bit more about the vehicles they're considering than ever before. This trend mirrors a shift in most other luxury markets, where consumers now use the internet to learn every detail about the items they're looking to acquire. When arriving at a dealership, not only are they more aware of the technical specifications of the cars on the lot, but they're intimately familiar with things like dealer costs and markups, as well as which options are worth the price they'll pay. That level of consumer knowledge can be a challenge to dealers since it makes maintaining profit margins more difficult.

Turning Weakness to Strength

In the luxury market, though, an educated consumer can work to the dealer's benefit, if they handle it appropriately. The first thing to remember is that the average luxury goods buyer is far more interested in their overall experience than they are in saving every penny possible. To take advantage of this shift in attitude, the dealership itself must become the product. It's a good idea to begin with a no-negotiation policy, even if it means prices are a little higher than local competitors.

A no-negotiation policy will enable a potential customer to deal with a single point of contact at the dealership throughout their experience. Their representative will handle the entire sale, and can focus on speed and convenience, which are two things that luxury buyers value most. After all, for most affluent consumers, their time is their most valuable luxury item, and they'll appreciate a frictionless experience.

The Sale Is Just The Beginning

For a luxury dealership to thrive in the current hot market, they must also focus on the post-sale customer experience. Offering customer services like door-to-door pickup and drop off for appointments is a must, but that's only the beginning. In today's digitally-connected environment, it's also essential for luxury dealerships to maintain a robust online presence.

That includes developing a customized smartphone app that will allow busy customers to interact with the dealership on-demand, and from anywhere. Offering service in that manner allows customers to complete tasks like scheduling service appointments, checking historical data about their vehicle, and even arranging for in-home test drives when they're considering a new vehicle.

The Ultimate Luxury

It's no longer enough to offer the ultimate in driving experiences. Luxury purchasers today aren't interested in a hard sell or in how much of a discount you're willing to provide. They're looking for their buying experience to feel like a luxury in and of itself. Today, consumers define true luxury as an ability to get what they want in a way that respects the value of their time and promises an experience that's first-class from beginning to end.

Luxury dealerships that adjust their methods to accommodate this attitude will reap the benefits, not only through increased sales but also by building their brand into the undisputed go-to luxury dealership in their area. For dealers, that kind of sterling reputation is more than just a luxury, it's the key to lasting success.

Currency is not what it used to be. The web has changed things considerably. Currency took a major step forward with cryptocurrency, which car dealerships should embrace.

This type of money was introduced in 2009, and now millions of people own a chunk. The following are a few reasons why dealerships should accept this digital currency.

A Few Dealerships Have Taken the Leap

It should be noted that many retailers and small businesses are making steps to accept cryptocurrencies. Furthermore, there are also a number of car dealerships taking the leap, too. Some of the first dealerships to accept digital coins as payment are online car marketplaces, which makes sense because they sell online.

There are also some large automakers who are also accepting this form of payment such as Tesla. These companies trust helps solidify the value of digital coins. There is no telling how far this is going to go in the auto sales industry, but it is wise to jump in early rather than later.

Get an Edge Over Others

Cyrptocurrency is very new, and a lot of it is still a work progress. It provides optimal privacy, anonymity with each transaction, and it protects all users from nation-related problems that could fluctuate currency. There are definitely a number of benefits.

Jumping into this digital currency now helps you learn more about this currency before others. It gives your dealership and your sales people the opportunity to get familiar with all the cryptocurrency available at any given time, and it also gives you a chance to explore cryptocurrency wallets to keep your money safe. This also allows you to build an established procedure to accept and process cryptocurrencies, which is probably going to become more important as time moves on.

Transaction Fees are Significantly Reduced

Another reason car dealerships should consider accepting digital monies deals with transaction fees. Most car buyers use banks or credit unions. This means the dealership has to deal with the crippling transaction percentage fees linked to these types of monetary institutions. Some could end up charging a dealership between three to four percent per transaction.

Fees are deceased with digital monies because there is no middle man. The customer nor the dealership has to worry about banks or credit card companies. All dealerships need to do is find a transaction partner who specializes in cryptocurrencies. The good thing is that most of these digital transaction percentage fees fall around one percent though these companies do have a minimum transaction threshold that has to be surpassed by the dealership in order to receive discounts.

A Word of Caution

The benefits of accepting this new form of payment are obvious, but that does not mean you should not take a few precautionary steps. Dealerships are going to have to accept that there are a few responsibilities a dealership needs to assume before accepting cryptocurrency. For one, it is important that your accounting team create additional procedures to handle digital transactions since digital coin transactions are virtually anonymous.

This means there is no paper trail online to follow, so it is up to you to create that paper trail to protect yourself should something go wrong. You should also make sure to set an immovable return policy. Cryptocurrencies are quite new, so the market is fluctuating. Just make sure that any refund you have to issue is issued at the original rate.

Car dealerships should start looking into digital tokens or altcoins, even if you are opting to stay out of this emerging currency. There is no harm in learning more about it, and it may help prepare you for the future.