Car Inventory Remains Low At Local Dealers, But Sales Are Steady | News

In the past eight months, Brad Howell Ford has only had about five or six new vehicles for sale on his East Boulevard lot.

The dealership typically had around 120 vehicles before the pandemic threw the global supply chain into chaos in 2020.

But owner Brad Howell said even with a drastically reduced inventory, sales were actually up in 2021 compared to the previous year.

“It’s a little hard to understand how you end up with a good year, but basically we had a good year, he said.

It’s an economic paradox that has developed over the past year as the global auto industry struggled to cope with the shortage of microchips and parts that has put a huge problem in vehicle production.

Since 2021, dealers across the country have received some of the inventory they used to get before the semiconductor shortage hit.

But around this time, the mindset of consumers about buying a new vehicle also changed.

Howell has now said that most of his sales come from customers pre-ordering a car or truck and accepting that it can be months before they get it. He said it would take eight or nine months to get an F-150 truck if a customer pre-ordered it today.

“The customer thinks they want a truck as soon as they can get one, and they can’t buy it elsewhere, so a lot of them say they’re just going to wait,” Howell said.

It’s the same story at the Paul Richards GM Center in Peru, which celebrated its 50th anniversary in 2021.

Tom Gaddy, new car sales manager at the dealership, said not only are customers ready to wait for a new vehicle, they are also ready to get a vehicle that isn’t even fully finished.

Gaddy said some customers may order a new truck with heated seats. But rather than wait for a chip to be available to build those seats, they take the truck now and have it upgraded once a chip is available.

“They will update the vehicles when they are available, and most customers understand that and there have been no issues,” he said.

The move towards pre-ordering vehicles has fundamentally changed the way dealerships do business. Instead of lots full of new vehicles, it’s now mostly about buying and waiting.

And it hasn’t necessarily been that bad, Howell said.

One of the reasons the dealership has remained profitable during the shortage is the fact that they didn’t have to pay interest on the new vehicles they buy that can sit in the field for months before. to sell them.

With just a handful of vehicles that sell out quickly instead of the usual 120 that can sit there for months, the savings add up, he said.

“I think you’ll find that when this is all over, the dealers won’t quite stock what we had in stock for a while, because I think we’ve learned that we don’t need to have 120. vehicles in the field, ”Howell said.

Although sales were up from 2020, the lack of inventory hampered the number of sales that could have occurred, Howell said.

For about a year, the dealership never received an allowance equal to the number of cars it sells, resulting in a constant squeeze of on-site inventory. Howell said it was ultimately an unsustainable scenario.

“When that happens, you’ll run out of it eventually,” he said.

The inventory crisis is also hitting local used car dealers, who are struggling to find decent vehicles that are below fair market value. With fewer new cars available, people are keeping their vehicles longer than usual.

This is driving up demand – and prices – for used cars.

Don Boehme, sales manager at Mike Anderson Used Cars located at the intersection of Sycamore Street and Indiana 931, said most used cars sold at auction are up to $ 4,000 above the book price. .

This forced the dealership to travel as far as Nashville, Tennessee, just to pick up reasonably priced, undamaged vehicles.

“It has become a chore to buy vehicles at fair market value for the consumer,” said Boehme. “I’m not going to go out and buy cars that are way over book value because at the end of the day someone is going to end up losing a lot of money.”

Now, instead of about 50 vehicles on the lot, the dealership has about 20 that are priced so people can afford them. But that lack of inventory reduced profits, he said.

“The margins are so slim now, it’s just enough to keep the lights on and pay your employees’ salaries,” Boehme said.

And the shortage of microchips and the shortage of other auto parts are not expected to end anytime soon. Howell and Gaddy said they expect the inventory shortage to continue until at least 2023.

Until then, dealers will have to adapt to a new market like they have never seen in order to survive.

“We’ve seen a lot of change over the past 50 years, but this is one that if you said that five or 10 years ago, we said no luck,” Gaddy said. “But that’s what we’ve always done. You have to live with the changes.

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