Does minimal new inventory mean trouble for auto dealerships, or...
- Thread starter emertmakeshiteup
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went past a huge used car dealership this past weekend that typically has a few hundred cars on the lot. I counted 14 cars on the lot. Coming back from the Delaware shore where there is a few big dealerships in a row that typically have a football sized field of cars in the lot. On the way down I looked over and the lot looked full and I was surprised. On the way back I looked closer and they only had the front row full of cars and the second row about 50% to try and look full. I was pretty shocked to see a huge dealership that probably had about 35-50 cars on the lot versus several hundred.
Generally new car sales account for 26% of a dealers gross profits, used car sales account for 25%, and service and parts account for 49%.
Where Does the Car Dealer Make Money? | Edmunds
Where does the majority of a dealership's profit come from? It's not from car sales — at least not directly.
www.edmunds.com
Most the dealer lots in State College are pretty empty. Some have more used cars for sale then new cars.
LOL used? hard to find them, and sometimes used prices are more than the same car new!! Some guys are paying up for inventory, others waiting and seeing.
We'd love to buy a new car, but the model we seek is no where to be found!
I just bought a new Silverado in July. The salesman said the day before I came they had one Silverado. They had 10 that day.
In my travels, I pass one Chevy dealership that doesn't have a single car or truck in their lot along the main road. Not even in the showroom. Another had around 7 or 8 with some being used. They are dwindling down to a couple as well.
I drove past Blue Knob Auto in Altoona recently and their lots are packed as usual with used cars. Looked like quite a few trucks but not sure what brands.
In my travels, I pass one Chevy dealership that doesn't have a single car or truck in their lot along the main road. Not even in the showroom. Another had around 7 or 8 with some being used. They are dwindling down to a couple as well.
I drove past Blue Knob Auto in Altoona recently and their lots are packed as usual with used cars. Looked like quite a few trucks but not sure what brands.
Generally new car sales account for 26% of a dealers gross profits, used car sales account for 25%, and service and parts account for 49%.
Where Does the Car Dealer Make Money? | Edmunds
Where does the majority of a dealership's profit come from? It's not from car sales — at least not directly.www.edmunds.com
and this is what actually spells trouble for dealers and the dealership model long term. Service and parts on electric vehicles is not nearly as lucrative.
So, good time to sell my Miata? 2010 model bought last year - it's a fun car but I don't drive it as much as I thought I would. Would I get top dollar?
Yes. I just priced my 3 year old SUV with 23k miles on Kelley Blue Book and it's worth more on a trade than I paid for it new. The private party price puts me well in the black.
yeah, know a guy who bought a $65k decked out truck 2+ years ago. Had about 25k miles on it as he doesn't use it for heavy driving. Sold it last month for $1,000 less then he paid for it.
you can check carguru or whatever. My sports car is not worth 10k more than what I paid.
In 1972 I purchased a new Pinto for $1999.00. Two years later i traded it in and got $2000.00 for it.
Yes, but you overpaid on the car you bought by $1500! Take that to the bank!
If you're anywhere near State College Blaise has trucks up the wazoo.
A ten or 11 y/o truck with 110K on the clicker is fetching at least 22 grand. Something in decent shape three years old is probably 35-50K even with 60 or 70 thousand on the odometer depending on rust or bed length. But hey, go fire up a new one, they're only $60K. IF you can find one.
Not shizzing on Blaise, this is the going rate I guess and they actually have inventory on the lot.
A ten or 11 y/o truck with 110K on the clicker is fetching at least 22 grand. Something in decent shape three years old is probably 35-50K even with 60 or 70 thousand on the odometer depending on rust or bed length. But hey, go fire up a new one, they're only $60K. IF you can find one.
Not shizzing on Blaise, this is the going rate I guess and they actually have inventory on the lot.
We had to buy a car and it was not easy to find. Prices are through the roof, no discounts, no real haggling. One dealer had 9 cars, another only 4. With flood losses demand is even more insane. One dealer wanted sticker +9k. The manufacturers are making more base models because they use fewer chips. Nissan seems to have a lot of cars but I'm not a Nissan guy. My 2019 is worth more now than what I paid for it 1.5 years ago with 30k more miles. It's bad and many future arrivals are already sold.
the issue I see is that based on the few articles I have read, probably won't be until late 2022 before things start to even break. demand is so high and output so low that it will take at least a year plus before inventory start to get back to being able to keep up with demand.
This will hit the service revenue shortly. You can't lose half your car sales and not see your service revenue untouched. The question is how long that impact will last and how pronounced it will be?Generally new car sales account for 26% of a dealers gross profits, used car sales account for 25%, and service and parts account for 49%.
Where Does the Car Dealer Make Money? | Edmunds
Where does the majority of a dealership's profit come from? It's not from car sales — at least not directly.www.edmunds.com
Another issue is that this will accelerate the shift to online and non-traditional purchase channels. Online sellers can better aggregate than a local lot. Online buying isn't for everyone, but the sectors of the population open to it will try it sooner.
quite a mess. I am seeing a lot more supply chain disruption predictions and mad inflation. This chip shortage, I am reading, is expected to sustain through the rest of the year AND affect almost all of 2022 until we see stabilization. At issue is not only the chips but massive R&D and releases for electric cars which are now being adversely affected. For example, VW a ton of money into their new EV platform release and is seeing little revenue due to the shortage. The splash or impact of the new car has been quashed because people go to test drive or buy one and they aren't there. And its not like they can say "well, it's just an improvement to the previous model so just get one and you'll love it." EV's are vastly different.
Also it is a problem for people with leases due or the need to buy a car for some particular reason. Now, if you can get rid of a car, it is a great time to do it.
The chip shortage is really bad. We are seeing quotes out to 2023 for some parts. New projects we are designing, we have to pick parts that are in-stock, and buy as many as we can ahead of even building the first prototypes. Current revenue projects are having to be redesigned when a part is not available and different parts added. The biggest thing that I see now, is the rush to production on substitute parts, and much of the prolonged testing that companies do is being waived (or at best case, minimally regressed). I wouldn't be buying things with electronics in it any time soon, as I believe that we'll see many quality issues down the road on this chip pinch.
I wonder whether more people are buying their cars when the lease is up. I have a several year old SUV with under 60k miles and have been postponing buying a new vehicle for this reason. The challenge becomes waiting until 2023.
Also a great opportunity for people with leases due as in most cases the cars are now worth far more than the residual.
Sure, but is this similar to selling your house in a hot real estate market? You get top dollar, but unless you're willing to relocate, you have to spend top dollar on another house!
Agree as to who really knows. Consider what service gets done on a new car for the first year that it's on the road other than oil changes and generally minor warranty work. If you compare that with the new cars sold over the last 5-7 years which continue to return to the dealers for service, the revenue hit might be relatively minor. In fact it's possible that because customers will own their cars longer due to the lack of supply, the cost of service and repairs might generate more revenue for the dealers than oil changes and minor warranty work since older cars have more serious problems.
Time will tell.
Yes. I don't know other than the "gut feel" that some revenue must be impacted. Even if new cars have a third of the service revenue early in life, that's significant to the average dealership. The warranty stuff is a bread and butter part of the business model.
Again, if new cars are selling for above sticker, then the dealer pockets that revenue. Maybe it offsets?
how does that work? So you are saying a person could buy the car for the residual value on the lease contract and then keep or resale it? I've never leased so I don't know. Also, if buy, you have to have the cash or ability to get the loan.
Also, I have to think that the carmakers will put chips in higher-end, more profitable vehicles and start to strangle the lower-end cars. This could affect govt mandates for fleet MPG targets.
I’m casually shopping for a 718. My local dealer has only 3 “allocations”, delivery in 8 months, MSRP. Think I’ll wait it out lol.
with Thomas:
he’s also charging $10k too much for a 19 cpo. I may drive it just for fun.
with Thomas:
he’s also charging $10k too much for a 19 cpo. I may drive it just for fun.
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When Porsche's EV came out you could get them pretty cheap. EV really violates the very notion of a Porsche to many. But it is a fine looking car. I was offered one for the mid-70s but I see them all now for well over $100k. Base MSRP is $82k and change.
What a gap. they also sell the turbo S (weird name) for $200k. How’s the 997?When Porsche's EV came out you could get them pretty cheap. EV really violates the very notion of a Porsche to many. But it is a fine looking car. I was offered one for the mid-70s but I see them all now for well over $100k. Base MSRP is $82k and change.
On our trip from SW FL to the East Bay Area of CA and back in May-June we saw numerous dealerships with as low as 10-15 vehicles on the lot and I’m not sure how many of those belonged to the employees. Some showrooms had no cars in them.
We have tired of one of our vehicles that’s around 4-5 years old but won’t be buying at least for a couple of years until inventories are built back up.
We have tired of one of our vehicles that’s around 4-5 years old but won’t be buying at least for a couple of years until inventories are built back up.
I’ve read that lack of inventory is actually good for the dealerships as they are charging more and their sticker from the dealer has remained the same.
my car has been great. I was offered $10k over what I paid for it on a trade in against a Taycan. I've been looking at selling it as it isn't very functional but is a TON of fun on a nice sunny day. But I've kind of "scratched that itch".
The Real Estate issue is a mixed bag. Prices are crazy right now--no denying it. But money is also cheap. Interest rates won't be this low forever, and if you want until prices come down, your monthly payment could very well be more than buying now due to increased rates.
Agreed. with homes are you upsizing or downsizing? A 30% increase for a $1m home is much more than one for a $300k home. So it is great to be downsizing right now.
Also, I have three cars and probably only need two. With Uber, I can use that when I have the occasional need (or rent). So it is a great time to shed that third car. As someone else stated if you've got a guaranteed value at the end of a three-year lease, a great time to exercise that and sell it.
Takes a lot of mark-up to make up for the volume hit and most people will delay purchases if surcharges go too high.
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