New Norm: Less Dealer Inventory

[13COBRA]

Interesting. So in all actuality it pays off to have a car/truck from the last 2-3 years if it's from a good Brand that holds it's value. Depreciation is a bitch

Yep. This year, I've purchased/trade back for 8 trucks at the same price I sold them for last year, with 15-20k more miles on them.

Here is a graph from just my pre-owned business this year. First week was 236% of first week last year. Then 99, 106, 110, 111, 99 and then 106%. The cool part, we're making this happen with half of the pre-owned inventory.

 

[13COBRA]

Last graph..here is the change in the market over last year, just price wise. All segments have seen an increase, with pick ups jumping 32.4%.

 

[SonicDTR]

Looking at new vehicles lately has sucked due to inventory. I could see a dealer just having examples people can check out, then ordering new. One of each trim and various options would be great to compare in person. Maybe even let them all be loaners? For me that has always been a huge upside to shopping used, I can drive it as much as I want and have even taken several overnight. Making everyone "order" new would probably only work if they could be delivered within a week or two though. IDK, just thinking out loud...

Between chip shortage and prices soaring I'd really love to see a more minimalist approach to vehicles. We don't need 3 dozen "computers" in just a base model econo box or work truck, but they continue cramming as much tech as possible into every single model. I'm all for the development of the smart features, but it is pricing vehicles out of reach with no real gain or demand. (Yea yea, I know they will sell every single unit, so i'm off my rocker lol)

 

[gimmie11s]

So order the exact vehicle you want and wait vs. hitting the dealer lot and playing the price game for 3 hours.

Sounds like a win, actually.

 

[Stanley]

This is just a conspiracy to make me pay as much as possible for my next truck.

 

[13COBRA]

So order the exact vehicle you want and wait vs. hitting the dealer lot and playing the price game for 3 hours.

Sounds like a win, actually.

If it weren't for the time aspect, I would 100% agree with you.

This is just a conspiracy to make me pay as much as possible for my next truck.

LOL

 

[BlksvtCobra01]

Dealers already tend to order more 'loaded' versions than base version because the margins are significantly higher.



That's probably nationwide. The average interest rate for new cars at my store in the last 365 days is 3.87%. Even 5% isn't a high interest rate though. I foresee rates getting back to 7-10% in the next few years. 1-3% is not sustainable long term.



Same with Ford. The F-150 plant in Dearborn is running 30% capacity and the Kansas City one is at 50%. Super Duty plant is down to 50% and will go down.

It's insane.

Why is this? The chip shortage? I had my 15 F150 in for the door latch tsb a week and a half ago and the local dealer probably had 15-20 21 F150’s on the lot. They’re sharp.


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[VRYALT3R3D]

@13COBRA Does your dealership participate in JD Power's PIN Explorer? I don't see inventory levels coming to normal until Q4, if that. Based on numbers from Wards Intelligence there are 700,000 fewer vehicles sitting on dealer lots in the U.S. compared to a year ago. AFS is projecting 400k less vehicles being built in Q1 2021.

 

[VRYALT3R3D]

Looking at new vehicles lately has sucked due to inventory. I could see a dealer just having examples people can check out, then ordering new. One of each trim and various options would be great to compare in person. Maybe even let them all be loaners? For me that has always been a huge upside to shopping used, I can drive it as much as I want and have even taken several overnight. Making everyone "order" new would probably only work if they could be delivered within a week or two though. IDK, just thinking out loud...

Between chip shortage and prices soaring I'd really love to see a more minimalist approach to vehicles. We don't need 3 dozen "computers" in just a base model econo box or work truck, but they continue cramming as much tech as possible into every single model. I'm all for the development of the smart features, but it is pricing vehicles out of reach with no real gain or demand. (Yea yea, I know they will sell every single unit, so i'm off my rocker lol)

Most people in Europe order cars. It is only in North America that dealerships carry so much inventory on their lot and need to much land.

The chips used in cars are not the same chips used in other industries and its quite dated, technology wise. It takes 6 months for a chip to me made from scratch so I don't foresee this being solved anytime soon

 

[derklug]

I can picture the hit on a 10% loan on a 72 or higher month mortgage. I seem to recall an article where FCA had the highest percentage of these loans.

 

[DSG2003Mach1]

Inventories have tanked. My store for example, volume was down 2.3% last year over 2019. BUT my inventory level was down 71%. We typically stock 280-300 new/used. Right now, I have 85 combined.

Is that making life hell on whoever is responsible for maintaining used vehicle inventory trying to keep a steady flow coming in when keeping less on hand? Of course if most of your used are trade in vs auction that's not so bad but no idea what your mix might look like

 

[13COBRA]

Why is this? The chip shortage? I had my 15 F150 in for the door latch tsb a week and a half ago and the local dealer probably had 15-20 21 F150’s on the lot. They’re sharp.


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The MY21 start up wasn't as smooth as years passed. Couple that with chip shortage and plant closures.. no bueno.

@13COBRA Does your dealership participate in JD Power's PIN Explorer? I don't see inventory levels coming to normal until Q4, if that. Based on numbers from Wards Intelligence there are 700,000 fewer vehicles sitting on dealer lots in the U.S. compared to a year ago. AFS is projecting 400k less vehicles being built in Q1 2021.

Yes. I think Q4 would be INCREDIBLY optimistic.

I can picture the hit on a 10% loan on a 72 or higher month mortgage. I seem to recall an article where FCA had the highest percentage of these loans.

FCA loves that segment of the market.

Is that making life hell on whoever is responsible for maintaining used vehicle inventory trying to keep a steady flow coming in when keeping less on hand? Of course if most of your used are trade in vs auction that's not so bad but no idea what your mix might look like

Yes. That person would be me haha

I spend an enormous amount of time weekly trying to buy inventory all over the country.

 

[VRYALT3R3D]

FCA loves that segment of the market.

I am sure there is a lot of overlap between the typical Dodge Journey buyer and a Nissan Altima buyer.

 

[13COBRA]

I am sure there is a lot of overlap between the typical Dodge Journey buyer and a Nissan Altima buyer.

FCA snags a lot of the more subprime business because NADA gives higher values to FCA vehicles than what they're worth. Typically when you trade in an F-150 or GMC 1500, you're right around NADA Clean Trade line...when you trade in a RAM 1500, you're typically $2,500 under.

Meaning when you go to sell it, rather than buying it for the value...you're buying it for less, and to the bank that makes it a less risky loan and they will stretch a bit for slightly underqualified applicants.

 

[gimmie11s]

Crazy times we are in for sure. This talk of loan APRs is crazy considering money is still being loaned to the banks at or near 0% and will likely stay that way until at least 2022.

 

[DSG2003Mach1]

Yep. This year, I've purchased/trade back for 8 trucks at the same price I sold them for last year, with 15-20k more miles on them.

So if supply is going to stay tight, possibly for the long term does that make it better to buy say a new F150 and trade it on another every 2-3 years vs a lease? I will say I've never had a good grasp on leasing and what makes one a good deal

 

[7998]

This won't last long. It'll be good for manufacturers and dealers in the short term but all it will do is convince people to hold on to their cars longer and keep used prices high. Instead of me trading my truck in every 2-3 years I'll hold onto it for 5 or 6 years. And when I replace it I'll go with whoever has a deal.
To be honest if a Denali is $60k because GMC needs to move trucks and the Platinum is $70k I'd get the Denali. None of the big 3 make a bad truck. And I know what you're thinking, "They won't be discounting the Denali because they are keeping inventory tight", but there is only so much pie to go around and they all will be competing with other manufacturers for that slice which cause them to offer incentives.

 

[13COBRA]

So if supply is going to stay tight, possibly for the long term does that make it better to buy say a new F150 and trade it on another every 2-3 years vs a lease? I will say I've never had a good grasp on leasing and what makes one a good deal

Yes. UNLESS, the residual rates get adjusted dramatically. Right now, it is much better to buy and trade, rather than lease and turn in.

This won't last long. It'll be good for manufacturers and dealers in the short term but all it will do is convince people to hold on to their cars longer and keep used prices high. Instead of me trading my truck in every 2-3 years I'll hold onto it for 5 or 6 years. And when I replace it I'll go with whoever has a deal.
To be honest if a Denali is $60k because GMC needs to move trucks and the Platinum is $70k I'd get the Denali. None of the big 3 make a bad truck. And I know what you're thinking, "They won't be discounting the Denali because they are keeping inventory tight", but there is only so much pie to go around and they all will be competing with other manufacturers for that slice which cause them to offer incentives.

With higher trade values, we've been seeing A LOT of people trade more often than they ever have. I think this will speed up the rate of turn and allow consumers to continue driving newer vehicles.

 

[SonicDTR]

Most people in Europe order cars. It is only in North America that dealerships carry so much inventory on their lot and need to much land.

The chips used in cars are not the same chips used in other industries and its quite dated, technology wise. It takes 6 months for a chip to me made from scratch so I don't foresee this being solved anytime soon

I do think the auto manufacturers are somewhat BS'ing about the chip shortage affecting them. But there is still a global silicon shortage affecting multiple industries. There are big name chips such as NVidia in vehicles too. I'm sure many others I'm not familiar with, or some subsidiary/partner/JV name that we wouldn't recognize right away.

 

[Weather Man]

I think the chip shortage is gonna really put the hurt of all brands sports car inventory. I could easily see guys who ordered 2020 corvettes that then got pushed into a 2021 being pushed into a 2022. Pretty crazy.

People powering their homes with the F-150 is gonna juice those sales beyond belief. I bet you couldn't find one on a TX lot right now.