No Relief for Auto Tariffs, Record 84-Month Loans, Customer Service Woes

Paul J Daly  0:01  
Good morning. It is Thursday, April 10. This is the automotive State of the Union on Paul J Daly. This is Kyle Mountsier. Today we're going to talk about, yeah, you know, tariffs, 84 month loans and customer service. Kind of taking a dive across the board was definitely kind of thing. Yesterday was like, an up and a down kind of day, you know, a lot a lot of mixed, a lot of mixed reality and emotions with the, you know, rescinding of the reciprocal tariffs automotive realizing, like, I don't know it fully, you know, takes us off the hook. Also heard some news from some OEMs about some of the strategies that they're planning on dealing with terror price. So, like, you know, just another just the

Kyle Mountsier  0:45  
Wednesday. It was yesterday, just another Wednesday. Yeah, you and I going to be on the ground, which was amazing. It was so good. Yeah. I mean, look, we, every once in a while, we get to step foot in a dealership, whether it's shooting more than cars, or just being being around. We got to be with Patrick, a bad yesterday, and like you were, you were walking through the service drive, like, breathing heavily, you know? And it's just really cool to see, you know, the way that that some of these dealerships like that, just like, there's a smile, right? Like you feel the smile when you walk in. The doors were open. It was a beautiful day. I just, I felt all kinds of happy. Yeah,

Paul J Daly  1:22  
it's great. You know, just being in touch with what's going on on the front lines, no doubt, always an invigorating thing. You know, coming from the service side of the business. I love the service drive in the morning, and I think a lot of people do you know that as well. When you show up in the morning and the pieces are moving and customers are showing you

Kyle Mountsier  1:39  
know what? You know what? One of my favorite sounds in all of the car businesses is it, nope, nope. It's, which is the role of a door opening in the service drive in the morning. Yeah, those face yeah, oh, that is, like, That sound is like, Oh, we're here. We're ready to go. Like, if you're the guy that gets to hit that button in the morning, the guy that gets to hit that button, you

Paul J Daly  2:03  
know, unlocking the doors of a restaurant almost. Yeah, that's the same we're gonna be. We're gonna be unlocking the doors to ASOTU CON 2025, in just a little bit over a month. Whoa, presented by our friends at Reynolds. Reynolds and goo goo, like we say it every day, but every day we get closer. We get more confirmations, more ticket sales, more like things coming together like this is the moment where all the like, the swag comes in, and the topics come in, and we're starting to, like, transition and massage some of the topics so they're super relevant when you get there, without a doubt. We were talking to Patrick Abbott about it yesterday, and the recurring theme. And we start, actually, we started releasing a bunch of content about what people feel about what happens at ASOTU CON, and how the takeaways that they get the feel is, Patrick's like, this is where you go if you actually want to solve problems, actually be around the innovators. David spizack was saying that he's like, you know, you can go to 20 groups, and you can go to, you know, like to your OEM meetings, he goes. But the truth is, when you go to OEM meetings, it's a lot of people who think like you do, and are bound by the same constraints mentally that you are because of he's a soda con is a place you come to get outside perspective, to bring real innovation into your store. So, you know, when talking about unlocking the doors, if we had a roll up door to let everybody

Kyle Mountsier  3:21  
one day. Al, COO tree, where you at? Yeah, give me what would be like. We can. We can, if you don't know, Al, on our team, you got to meet him when you come to us. Oh, yeah,

Paul J Daly  3:32  
Nashville. Al, Nashville. Al, it's great. Yeah. So you get your tickets ASOTU con.com are we? Did we really? Yeah, we really seen the game we

Kyle Mountsier  3:41  
did. Let's do it right now. You can go to wait. I don't think we have a graphic for this. No. Nathan, Southwick, Nathan, Nathan, come on. Why did you create this game? Where did this even come from?

Paul J Daly  3:53  
Well, we say we mean a game like you mean a real play it online and you get addicted to

Nathan Southwick  3:58  
it. This is a Paul thing. I think you and I had talked about it at one point, like, in, like, December or January, maybe, and then you and I were talking about something about ASOTU CON. And then you were

Paul J Daly  4:11  
just like, let's just see, like, what we can do. And you opened up, grok, and you were like, it's like, what are these games called, where it just goes from one side to the other? Right? Just a little side scroller, right? Yeah, right. That's what you said. You said a side scroll. I was like, Okay, I opened up grok. I was like, create me a side scroller game for SOT con. And I hardly gave it any prompt. And I went out and figured out what a soda con was about, and it generated, like, code and a concept. Were like, could we really make this work? And we spent, like, what we probably spent, like, five minutes in my office, like, Okay, we need to do this. We need to load this. Had a little issue. And then we and it was a Friday, and Nathan goes, I think I might, you know, spend a little too much time on this this weekend. And when we came back, there was a game. This is

Kyle Mountsier  4:53  
what we got. This is what we got. We got a game. Look at this. Oh, we can't add it to the stage. How can we? Can. We

Nathan Southwick  5:00  
can. I gotta, I gotta, I gotta. Check this out. If you

Kyle Mountsier  5:01  
go to jumper, where is it? Jumper? Dot ASOTU con.com, you'll see this game. You can choose your player, Paul, me, and then there's some craziness. You can read all the instructions, because there's a lot of instructions, but it's just one of those jumper side to side games. Then you can, like, get michaelified, and then you're invincible. You gotta dodge buzzword bums, yeah, you dodge diamonds, and then can't fall. If you fall games over, you get extra lives if you hit it with when you're on Michael FIDE It's magical. Then he plays away. Oh, look at Michael woods in the background. Look at that guy. He's gonna be there, my goodness. And there's a leaderboard. So old

Paul J Daly  5:42  
school, put your three initials in and there's a leaderboard. What's the high score? Right now,

Kyle Mountsier  5:45  
the high score is high scores,

Nathan Southwick  5:46  
like, 800 something. I might even notice 13 coins. I might need to, like, refresh the leaderboard, just so that we can start fresh. Yeah, look at this. And also, also, I will say this to like, the music is clutch. Like, if you are not playing it with sound on, it is sound on,

Paul J Daly  6:04  
sound on, lot of throwback. So Nathan's been working on that, maybe not even low key. There's a time when I walked in the editing room and all three of them were playing the game, which is a testament to is it's a dig. And whereas we beta tested this around with friends, like, I think Nathan's whole family now is in a deadly fight for

Kyle Mountsier  6:22  
Patrick, a bad Patrick, a bad yesterday afternoon, spent way too much time. Oh, did he? Oh, yeah, it got great that didn't serve its purpose. He fell in like, four coins and, like, immediately hit, start game again. He's like, Oh no, I'm on competitive. I'm gonna give it to his son, Parker. So all right, we should, we should do some stories today. But jumper dot ASOTU CON com, you can, you can find it all day. Yeah, we'll

Paul J Daly  6:46  
launch in things like that. All right, let's talk about some news. The auto industry still squarely in the tariff crosshairs, even as President Trump backs off his broader reciprocal tariff plan, while a new 10% base tariff replaces most of the global duties, the 25% tariff on vehicles and key materials like steel aluminum are sector specific, not reciprocal specific. Yeah, and they're still active despite ongoing tariffs. Markets surged on the pause. News, Tesla jumped 22.7% GM was up almost 8% Ford up over 9% industry leaders are pushing for relief from mish autos, Glen Stevens Jr, advocating for protecting international supply chain. So what's, what's Mitch auto? Is that their Ada, probably, yeah, yeah, they work. They work close, because they're

Nathan Southwick  7:34  
Michigan. They work closely with a lot of Canadian suppliers and stuff like that. Got it. Thanks for that

Paul J Daly  7:40  
context. He's calling the fragmentation harmful to competitiveness. It's hard to Yeah, President Trump said he would consider exempting specific companies from tariffs, saying, quote, we're going to take a look at that, whatever.

Kyle Mountsier  7:51  
Yeah, just last week. Well, I think it may have been announced this morning, but Nvidia got some, some particular kind of all of theirs. They got some considerations for, you know, bargaining against, like, Hey, we're going to invest in, you know, North American us. Oh, right, hey, we'll cut you on the tariffs, as long as you invest locally as well. So we're going to see a lot of these kind of negotiations. Yeah, everything's not off the hook. But a lot of manufacturers are already starting to press in. We got some information that Mazda yesterday is saying, hey, look, we're going to make sure that, you know, that we're going to balance some of the changes across the board, across parts, across inventory. You won't, you won't really feel the impact. You know, the manufacturers on that side of trying to mitigate the impact of the consumer and to the dealer. But don't let your guard down quite yet. But there's definitely good news. It seems like there's a lot of countries that are willing to negotiate, willing to kind of figure it out, and then Yes, yesterday, just to see the Dow, the S and P take some of its biggest increases in many years, right? We've seen it take some massive decreases now, a massive increase. Everything's volatile. Don't let your guard down, but don't, don't pay attention too close, because you can control what you can control right in front

Paul J Daly  9:12  
of you. Yeah. And you know, you and I have been having conversations with a lot of people, and some of the savviest operators are like, we're going to keep doing what we're doing and what we always do, yep. And right, like we're not going to let tariffs get in our way. Basically, is just That's it, just like we're not gonna let a pandemic get in our way, just like we're not gonna let a recession get in our way. Same story from the from the dealers who are really making it, speaking of really making it or not making it. Not surprising news. More more new vehicle buyers are turning to 84 month loans more than ever, highlighting just how financially stretched today's car shoppers remain. According to Edmonds, 20% of q1 new vehicle loans were for 84 months, 20% up from 16% in 2024 it's a significant increase. Increase and 13% in 2019 so almost doubling in five years. The average amount financed also jumped to over 41,000 compared to 32,000 in 2019 on the use side, 12% of loans ran 84 months, more than double the 5.3% seen in 2019 with an average of 28,000 finance dealer Michael Cummings of i 10 Toyota, said, quote, I really, really don't like going 84 months. It's not healthy for the customers in the long run. It's not healthy for us dealers in the long run.

Kyle Mountsier  10:32  
Yeah, this is, this is clearly an issue when it comes to trade cycle management and getting people out of these vehicles. Obviously, when prices go so high, people are still trying to maintain a payment, and lease rates and residuals have not kept pace with the ability to get that low payment, so you still don't have the ability there. And then, when you look at anyone that can't qualify for subvented leases, you know you kind of have to go 84 we'll see if you know, the market may just change, right? And you may just see trade cycles be become a little bit longer, although, you know, one of the things that that I'm talking to dealers about is you're still seeing used car valuations pretty high, and we're going to see that through the through this year. So, you know, there's kind of a balancing act between, like, trade cycle management being a little bit worse because of high, you know, high interest, high term loans, and trade value still being high enough to be able to trade these people out. So I think the market is balanced, but still kind of a scary thing to look at, almost doubling on new cars and and doubling on used cars. The amount of 84 month loans, like I remember, you know, if we were going 84 months, you know, in like 2013 2014 we were stretching like we had two banks that would do it, right? It was

Paul J Daly  11:42  
a totally, yeah, I think that definitely increases the value of it after market service contract at the point of sale first, right, to make sure that that vehicle is Gap coverage, right? Gap coverage, mechanical, major mechanical, even the small stuff. I do think the human nature of the desire for change still kicks in, right that 3634, years in, a lot of people just start looking. The real point is, obviously, how likely are they to get out of that vehicle, even, even so they're not rolling a bunch of negative, negative equity. Who the heck knows what the market conditions going to be in three years? We don't even know what's going to be in three minutes. You know, we have no clue, but yeah, just like a little sign of the time speaking assignment, the Times stop. Segway,

Kyle Mountsier  12:30  
a new report from research firm retail touch points, cites Forrester's 2024 UX usdx index and reveals that customer service is at its worst level since 2016 Yikes, despite access to advanced tech, only 3% of brands are said to be truly customer focused, and shoppers are losing their patience. 70% of customers are saying it's hard to find in store help. 83% of associates say their jobs are too complex. Shoppers are prioritizing speed over flare. 19% say, quick item, location drives, return visits, so the ability to just get in there attraction AI is gaining traction. 84% of customer service managers plan to deploy AI agents in 2025 up from 42% in 2023 so people leaning on AI agents as a and, and it seems like increasing the complexity, even still, of of individuals, jobs, reducing staff, making it less possible. I think that this is, this is an interesting kind of move when we feel like we have all of the technology at our fingertips, yet customer service seems to be waning because we're probably focusing less on training our people to be great. We're

Paul J Daly  13:46  
gonna pull Nathan in for some personal context on this before come on in. Nathan, yeah, I have a really, I mean, I guess the data is the data I haven't looked at. I have a really hard time believing that customer service is worse than it was during COVID, I'd be like, a really hard time. Oh yeah, yeah. I mean, it was

Kyle Mountsier  14:08  
pretty terrible, well, but this was Since 2016 Well, I guess I know that's my point. Well, but I mean, you know, we got, especially in the retail business, we got lazy during COVID. And there was a little it was a little bit slower, you know, you could slow down, take your time with people, you know. And now it's like, there's, there's a retail that's insane. It's hard to find staff. Nathan,

Paul J Daly  14:31  
what's, what's your context?

Nathan Southwick  14:33  
Well, so I was, I was out last night with a couple of friends. We were at the mall, and one of my friends wanted to go to Dick's to try and some shoes. He's a runner, and he's looking for some new race shoes. Kyle, you and I can geek about that later. But he goes in and he wants to try on two separate pairs. And so he lets them know, like, here's what I'm looking for, and here's what it is. And and they've got all their stuff that's like, this is Josh, and these are the shoes that he wants to go look for. And like, it pulls. The thing on their app, the guy comes out with one pair of shoes. And my friend is like, hey, is there? Is there another? And the guy just sort of like, gave him a blank stare. Like, like, No. And Jess is like, you sure? Like, and the guy just sort of like, shook his head and he walked away. And Josh like, there's definitely another pair of shoes back there. He just didn't look and like, two minutes later, another associate comes out with the second pair of shoes, right? But just, how

Paul J Daly  15:24  
does this work? You you open the app and you, like, summon shoes from the back.

Nathan Southwick  15:30  
I'm not sure if he did that, or if you just let them know that, like, he's wanted to try on two pairs of shoes, and then it like,

Kyle Mountsier  15:37  
well, and I think what this is, is like, it just points to and us in auto retail, I think this is something that we can focus on. It's like, No, you have to go to the end of the road with every single customer interaction. And so if customers are what an opportunity right now, if customers are experiencing lackluster service across retail, right and they could walk into a dealership and like the variable between great service and lackluster service can be so very one side to the other, and you can literally, like, we have an opportunity right now to lead the pack and other people to look and retail it like, Why? Why does everybody love shopping for a car? You know, it's a great opportunity.

Nathan Southwick  16:19  
We were talking about will gadera earlier, and if you remember his the interview that you guys did with him last year, he said, like in an industry where where the expectation is bad, all it takes is carrying a little bit more and trying a little bit harder, and it'll put you up over that. That's that top great,

Paul J Daly  16:34  
great point. Well, great personal context as well. So look a little bit more. That's all you need just try a little bit more today. Focus on that customer service. Focus on serving your team, and I think the other things will fall in line. Thanks for being with us here today. Go to what is it? Jumper, dot ASOTU con.com,

Transcribed by https://otter.ai

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