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  • Writer's pictureGreg Gillespie

Current Observations & Q1 2024 Forward Review

Updated: Mar 31

January, 2024


Greg Gillespie  Vice President of Sales - Midwest  Source One Financial Services
Greg Gillespie, Vice President of Sales - Midwest Source One Financial Services

2024 began with impressive crowds attending multiple RV & Boat Shows around the country, some better than others. This all happened as we looked forward to several rate cuts to re stimulate our still recovering economy, and then hoping the stock market would rally on the same expectations. With 2024 now under way, the real expectation was that inflation would be dropping, making room for the Fed to make a move and lower interest rates up to as many as 3 times, with one Fed official predicting 5. Although inflation has relatively stopped for now, it’s still hanging around making hopes for a rate cut likely put on hold until June. According to a recent Survey by MSNBC, US bank sentiment is as follows, 64% chance of an interest rate decrease by May; 85% chance by July and an almost certain 96% chance by September. It has always been a loosely followed rule that rates are not to change 6 months before a Presidential Election as an unwritten tradition. With how things are going today, I cannot imagine any traditions followed, but the consensus is that we should see more than one rate cut later in the year. A big catalyst for early 2024 lower rates was the Jobs report in February revealing unemployment lowered to 3.2%, which in turn ended up being not so good for lower interest rates. However, when you look at the real numbers for the 322,000 jobs created, most of them were part time jobs and even more were Government jobs, which helps us when rooting for rate cuts.


Looking ahead to what we might see for the leisure industry as a whole, I would expect things to be fairly close to what we saw last year in terms of sales. Better than average volumes in 2024 could very well set us up for a huge year in 2025, given the political winds  going forward and possibly more interest rate decreases further down the road, so there’s lots to be bullish about.


Inflation over the decade 2010-2023

A recent Axios survey on inflation showed many Americans feeling anxious and angry at their Grocery Stores over high prices. This misplaced anger is significant in the fact that grocery stores DO NOT control their prices as much as we think, only their margins. It’s mainly the suppliers that do and then things rolls downhill from there. If this sounds familiar, this scenario has spilled over to thousands of industries and the lending industry has taken its’ share of abuse. This same dynamic carries over to RV & Marine dealerships and the list goes on. The shift in perceptions and how we deal with them are key to your success. Your customers are not necessarily upset with you, but they do see what’s going on and applying for credit is sometimes how they learn about the changes in interest rates when looking to buy a new Rv or Boat. As a dealer who offers retail lending, you need to remind your customers that over an 11-month period 2022-23, there were 11 interest rate hikes that caused rates to accelerate faster than any time in history. Your job is to let them know that you are working in their best interest and that you will find the best deal possible, which is all they want to hear. In addition, a little refresher for those of us who have been around a while, these rates are not traditionally that high. Working with such low rates from 2008 until last year, some consumers have never seen rates like these or just forgot and became used to all the lower rates for the past 15 years. Either way, it’s our job to help with these perceptions that can make or break a deal.


Though inflation has largely stopped, prices are still significantly higher than where they were in 2020 and the cost of living is not as affordable as it was 3 years ago. Based on data from the Bureau of Labor Statistics, Americans must now spend approximately $125.51 for groceries that would have previously cost $100 in Jan 2020. There are all kinds of opinions out there claiming that everything is coming back to where it was. As much as I’d like this to be true, it’s very hard to see because prices have not come down at all, only stabilized. Most households have not seen significant wage increases to close the gap, allowing inflation to eat up their earnings. The biggest finger we can point to is not the Covid Pandemic itself but the Covid Stimulus that handed out $6 Trillion so everyone could hide in their own homes and watch Netflix instead of working or going to school. It was this massive overreaction, I believe, caused most of the problems we’re still dealing with today. During Covid, most dealers experienced out of this world demand with very little to no inventory to capitalize on it. Post Pandemic it became apparent that manufacturers were filling lots up with more inventory than dealers could only dream of just a year earlier, but now at much higher wholesale prices. This led to an overstock of 2022 inventory with some dealers still trying to work their way out of this inventory glut. 2023 models came in cheaper than 2022 and now the trend is continuing, making it more important to get out from under previous years inventories. All this has created an urgency to move current year models before new ones arrive, which was never as big of a deal pre pandemic. I suspect this will take care of itself once the overstock of post pandemic inventory is finally gone.


The thing we need to focus on now are the kind of post pandemic consumers that are still in the market for larger purchases like Boats and Rv’s. Since everyone is not a cash buyer, we need to focus on the average consumers expendable income (that’s money left over after all living expenses are paid for) used for monthly payments, and how much can we expect sales to run in this new post pandemic economy. A Jan 2024 study from “Nerd Wallet” tells us that credit card debt is now up 16% year over year with credit cards sitting at an all-time record debt of $1.2 Trillion dollars, with an average household credit card debt now at $20,221. Another item to keep in mind is housing, due to mortgage rates moving from 3.5% to 7%. With all things considered, most people now cannot afford to buy a new home, especially in metropolitan areas, making rents in some markets now double from just a few years back, This includes about 60% of US households getting hit hard in larger markets leaving them with less expendable income for things like RV’s & Boats. It is also important to remember that the Federal Reserve has never really signaled that rate hikes are done, despite a positive outlook on the economy; just remember stay vigilant because anything is possible, my bet is on the positive with lower rates coming later this year.


One major cultural shift or just a fun fact…will be the number of Baby Boomers dropping out of the labor force and hitting the road or going to the lake this year. Predictions for 2024 include Baby Boomers to be replaced as the largest working segment by Gen Z (born 1997 – 2012) before mid-year, leaving more retired workers than ever with more time on their hands to do whatever they want. This represents a pivotal change in our culture that makes for an interesting shift to capitalize on. New customer demographics continue to join the ranks of the millions with an RV or Boat and this will continue for years to come. It’s becoming important to stay informed on what our key demographic(s) looks like for our industry and how they buy and view debt.


Gen Z may not be our current target market today, but we will certainly be focusing on them soon enough, so get ready. These economic shifts may seem over whelming at times but you’re not alone when trying to figure this all out, the one size fits all approach has never worked in our industry and never will, so always feel free to reach out with any questions.

                          

All in all, my prediction, it only gets better from here…

 

As a partner to thousands of dealers, our success here at Source One is only possible through our partner dealers and we never take this or anything for granted. By using the simple goal of building strong relationships, staying humble about our past and focusing on the future, we will always be different. Source One will always keep our dealers, lending relationships and most important, our customers at the heart of every financing option. Since 1999, Source One Financial has provided a small town lending approach to nationwide lending and been a primary source for consumer lending to over 3000 dealerships. We are here to take your call personally and provide the answers you need in a timely process to ensure that financing your sale is the easy part. We provide prompt credit responses, competitive rates to allow more New & Used financed deals, all through exclusive lending options for your customers. As we like to say, partner with Source One and you will see the difference by making more money through smarter financing.


 

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Greg Gillespie

Vice President of Sales - Midwest

913-953-1139 cell


Greg Gillespie Vice President of Sales - Midwest Source One Financial Services
Greg Gillespie Vice President of Sales - Midwest Source One Financial Services

Greg Gillespie has been in the banking industry for over 25 years managing portfolios as large as a billion dollars for several Fortune 500 Companies. Over the past 5 years, he has managed the Midwest Territory for Source One Financial Services in Missouri, Tennessee, Colorado, Kansas, Oklahoma, Nebraska, Kentucky & Arkansas. Greg graduated from the Warren Buffet School of Business at the University of Nebraska with degrees in Economics and Marketing in addition to attending Mansfield College at Oxford University studying International Economics.

 

Disclosure: The views expressed in this commentary are subject to change based on market and other conditions. This document may contain certain statements that may be deemed forward thinking statements. Any projection, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative events that will occur.


The information provided is for educational and informational purposes only. All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability, or completeness of, not liability for, decisions based on such information, and it should not be relied on as such.

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