Understanding the Road Ahead

Mississauga Board of Trade
Mississauga Board of Trade


July 30, 2023


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Author: Canadian Western Bank

Automotive dealers face an industry turbocharged for change – your bank should understand the road ahead.

Today’s fast-evolving business landscape makes it more important than ever for Canadian auto dealers to have a flexible financial partner riding shotgun.

In fact, Canadian Western Bank’s Gus Masi says the amount of change in the auto industry lately may be the most he’s seen in a career spanning nearly three decades.

“I’ve been in the dealers’ shoes, on the manufacturing side, and also the banking side,” says the AVP andGroup Lead of the bank’s automotive finance group, who – in addition to experience in manufacturing sales and distribution, parts and service, finance divisions, and as an executive at a large dealership group – is a self-professed car nut.

Masi’s currently helping dealer-owners navigate three trending lanes of change: post-COVID challenges, electrification, and consolidation.

“At this point, the impact of COVID, and how it evolves, will be a factor for dealers for at least the next few years,” he says. He explains dealers are not only continuing to steer through supply chain issues, butthe higher interest rate environment is also elevating borrowing costs to the possible detriment of consumer demand.

Added to this is the rise of electrification. The impacts of this potentially industry-transforming trend could go beyond just selling electric vehicles. The new technology requires dealer-owners to consider significant capital outlays to modernize showrooms, install charging stations, restock parts departments,retrain staff and technicians, and upgrade service capabilities.

It’s not all bumps in the road, though. Masi says an industry shift towards consolidation presents opportunities to offset some of these challenges. He points to two driving forces behind consolidation: first up is economic and market uncertainty, which is prompting many aging dealership owners to sell; second, some younger owners with a small number of dealerships are realizing that they need to get bigger to succeed.

While expansion means taking on significant debt, Masi explains that consolidation can also lower costs for owners on a per-dealership basis because they can merge core business functions for numerous dealerships under one umbrella. He adds that taking on several brands also diversifies sales channels and mitigates risk – like the unknowns around how electric vehicles will affect dealer operations.

Continuous change makes flexibility and adaptability a necessity for both the dealership owner and their financing partner. Masi describes a recent scenario involving his team and a Vancouver dealer group seeking to buy out a partner and purchase real estate.

“They were looking for some unconventional terms compared to what the market would typically do. We were able to assist them and beat out another leading financial institution. Our rate was competitive, and the terms matched what the client was looking for to support cash flow flexibility,” he says. The client has since enlisted CWB’s help to build another dealership. “Dealers need partners who understand the business and the nuances involved. We are not the financial partner who says, ‘Hey, we will take all the risk.’ But we are the financial partner who says, ‘Let’s listen to you.’”

Connect with the Dealership Banking team: dealership@cwbank.com

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Mississauga Board of Trade
Mississauga Board of Trade
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