As the leading floorplan financier for Leisure Equipment Manufacturers and Dealerships across Australia and New Zealand, MitchCap is at the heart of the industry. Every month, we fund over $50 million in new boats, caravans, bicycles, motorcycles, and agricultural equipment inventory purchases for over 350 dealerships on behalf of more than 70 factory partners. At any given time, our dealers hold over 8000 units of equipment across 400+ locations, ready for demonstration, rental, or sale.
Let’s look at some of the highlights of 2023 and get the inside scoop on the current market as we kick off 2024.
1. Resilient Dealerships: Despite rising costs and slowing demand, dealership books remain healthy. Many have stockpiled a trading buffer after above-average returns during Covid. Dealers are stocking conservatively, holding 50% of their credit lines on average (down from 65% pre-Covid). They’re prepared for a slower market but strategically positioned to trade well even in a tougher economy. Our financial health checks corroborate this resilience – the average probability of default for a dealer today is less than 2%, with credit scores rated “Very Good”.
2. Lingering Stock: The market has decelerated, and inventory isn’t rotating as swiftly as during the Covid-induced frenzy when government stimulus and domestic lockdowns, coupled with low supply, sent the leisure equipment markets soaring. Stock turns now hover at 2.7 times per year, down from the long-term average of 3 times and the peak of 5 times. Inflationary pressures have also prompted dealers to hold older stock rather than replace them with new, pricier models for demonstration and display.
3. Rising Costs: Everything comes with a higher price tag these days. The average purchase price at wholesale from factory to dealer has surged by a staggering 18% since pre-Covid. However, data reveals that consumers are still buying, indicating a significant restructuring of inventory, and holding costs for all equipment dealerships.
4. Used Equipment Market: Analyst predictions of consumers returning caravans, boats, and bikes post-Covid seem to be off the mark. Used trading at MitchCap Dealers is significantly up, but it still only constitutes 2% of Dealer Purchases. We anticipate a slight uptick and stand ready to support dealers with used and trade as needed, but so far, profitability and non-trade back sales remain the norm.
5. Dealership Success: To all the entrepreneurs who took a leap of faith, backed themselves, and opened a dealership selling goods they’re passionate about – kudos! The average MitchCap Dealer makes an 18% Gross Margin and 7% Net even today. Yes, it’s hard work, but your success is well-deserved, and we are proud to be your finance partner on this journey.
For more unique and detailed insights from MitchCap, feel free to reach out. We’re always here to help navigate the exciting and ever-evolving landscape of the leisure equipment industry.