When consumers see an increase in everyday expenses, it could possibly take away from money they would otherwise spend at retail stores, which could be happening now as auto repair costs are on the rise.
Anytime retailers go through periods where sales might not be as high as expected, cash flow could take a hit, which can make it difficult to obtain a loan from a bank. However, inventory financing could be a viable option during these times for small- to medium-sized retailers.
According to the 2013 CardMD Vehicle Health Index, car repair costs increased 10 percent nationwide to $367.84 on average per repair. This is the first time in six years this expense has jumped.
The rise in repair costs can be attributed to a 6 percent bump in the price of parts and a 17 percent increase in labor expenses.
However, it wasn't all bad as owners of hybrid vehicles saw repair costs decline.
"On one hand we're seeing an increase in car repair costs that can be attributed to factors such as a market correction and a higher percentage of more expensive repairs related to the aging vehicle population, but on a more positive note we see costs for hybrid repairs continuing to drop and drivers making fewer check engine-related trips to the repair shop," said Ieon Chen, CEO, CarMD.
If small- to medium-sized retailers begin to see cash flow struggle as a result of consumers spending more money on car repairs, it could be difficult to continue normal operations.
But, with inventory financing, these companies are able to use current product as collateral to obtain a revolving line of credit, which can be used to help get through times when cash flow might fall below normal levels.