Lenders have created a severe slowdown in the supply and demand pipeline by curtailing floorplan financing to RV dealers despite lower inventory levels, according to Tom Walworth, president of Statistical Surveys Inc.
“They can’t get financing to replace the product they sell,” said Walworth, whose Grand Rapids, Mich.-based firm tracks national retail registrations. “Last year, lenders tightened up flooring in an effort to shrink inventory – which was necessary because there was a surplus. And it has worked. But now we have a situation where inventory is down, and lack of financing is still restricting dealers’ ability in buying product from the manufacturers.
“It’s throwing up a roadblock for the traditional supply and demand process, and with summer coming, we need to get that process back on track.”
The impasse, Walworth contends, is out-of-synch with a telling trend that surfaced last year showing retail sales were consistently outpacing wholesale.
“Retail numbers were still down in year-over-year comparisons, but the fact that retail was on top of wholesale is a clear indication that dealers have been contracting inventory,” Walworth said.
He cited numbers from May through December in 2008 that showed 25,642 more units were sold than were shipped by manufacturers.
“For eight straight months, retail was higher than wholesale in terms of unit volume,” he said. “If the credit loosens, then the dealers will order product and wholesale numbers will go up and become more in line with retail.”
Other industry leaders, including Recreation Vehicle Industry Association President (RVIA) Richard Coon, have echoed Walworth’s assertion. RVIA reported it is putting together a program that will be available to dealerships trying to develop local wholesale and retail credit opportunities.
“Wholesale financing is at the top of our list,” Coon told RVBusiness following the association’s Strategic Planning Committee meeting in January. “We are developing a video or Powerpoint presentation that will be something the president of a dealership will be very comfortable taking with him to these local bankers.”
In addition to stifling production by OEMs, Walworth said the lack of available credit has created an unhealthy glut of slow-selling merchandise on retail lots.
“The dealers are selling the hot products, which seem to be lightweight towables and more fuel-efficient motorhomes units right now,” he said. “But then they’re stuck with the dogs because they can’t replace the products that consumers are looking for. There’s a real disconnect going on because OEMs can’t get their product to dealers’ floors.”
Walworth added there are other economic factors surfacing that are actually working in favor of the industry, making it more attractive for banks to get active in floorplan financing.
“You have record low interest rates and the lowest fuel prices we’ve seen in four years,” he said. “There are also the best values in RVs for consumers right now, mainly due to OEM incentives.
“I think there really is an opportunity for lenders to make some more money by getting financing to dealers so they can buy product and turn it. They need to be conservative – check flooring and make sure dealers are in compliance regarding inventory – but I think that if they take the steps to open things up we can work our way out of this recession.”