Buying a new or used car generally follows a certain order. You research the car you want, you visit the car dealership to take a test drive, and then if you like it, you determine how you'll pay for it and what kind of auto insurance plan to get. But a new report suggests that by this time next year, a considerable number of car dealerships that you may have visited will be out of the business.
According to the 2011 PricewaterhouseCoopers Automotive Dealer Trendsetter Survey, approximately 30 per cent of automotive dealers in Canada are expected to close their doors, change ownership or be nearly retired in the next 12 months. This forecast was even more prevalent among single-point dealers - which aren't controlled by groups - as 75 per cent of dealer owners surveyed said they will likely close their doors within the next 10 years.
Damian Peluso national automotive leader at PwC, noted that this could make the car buying landscape look very different.
“With so many auto dealers planning to leave, the potential for further dealer consolidation and the rise in new owners is expected to be high," said Peluso. "There’s going to be an unprecedented opportunity for existing dealer groups to acquire additional stores."
However, dealership owners don't think they will sell their companies to a third party, the poll found. About three-quarters of dealers said they expect to keep the business within the family.
"The reason for this may be that 87 per cent of dealers today have more than half of their family wealth tied up in their dealerships, which includes the related real estate," noted Peluso.
Despite this desire, less than half of the dealers polled said they think their intentions will ultimately happen.
Dennis DesRosiers, president of DesRosiers Automotive Consultants, said this may be because so few dealers have implemented a succession plan. Given the world's economic instability, he noted that a good succession plan has never been more important.
But Canada's economic function has largely remained positive. The latest indication of this is the country's surging labour force.
Statistics Canada reports that in March, employment grew by 82,000 jobs, most of them being full-time positions. That brought the national unemployment rate down two-tenths of a per cent to 7.2 per cent.
On a year-over-year basis, employment jumped 1.1 per cent, with 197,000 more jobs than the same 31-day period last year.