Car Dealers Aren't Struggling as Bad as You Think

May 17, 2022
Car Dealers Aren’t Struggling as Bad as You Think
Car Dealers have empty lots but record profits

Car dealers are still struggling to meet the demand of buyers, but things aren’t exactly what they seem. Take a look at any car dealership around Houston and it will be obvious that these dealerships are struggling. One dealership pre-COVID times had more than 400 new vehicles on their lot. Today, there are only two. A Highlander and a Camry. This appears to be a problem in the most populous city in a state that comes in second in the nation in vehicle use. The chip shortage, along with the supply chain issues, has slowed down production for new vehicles to a screeching halt. However, even though the dealers don’t have cars on hand, that doesn’t mean they’re not selling any.

The same dealership that has the Highlander would sell about 400 vehicles a month, pre-pandemic. Today, they get around 280 sales a month. Most of those vehicles are sold over the phone. The dealer walks the customer through the online inventory and puts the order in, and they wait for delivery. Deliveries can take anywhere between 2 days and 6 weeks, but customers understand the delay and they’re willing to wait.

Nationally, US consumers purchased 14.9 million vehicles last year, far below the 17.3 million average. This all looks like bad news for car dealers, but not all dealers aren’t doing so badly in this terrible time. Prices are higher than ever for cars. New car dealers are stocking more used cars than ever before. A used car that could be sell $20,000 just last year can now sell for $25,000 this year. That’s all profit right there. Even with new cars, customers understand the issues and are willing to pay more than the sticker price to get a car. Some reports claim that some dealers will even charge more than $10,000 over the sticker price if a customer looks motivated enough.

Higher prices and even higher demand mean that dealers can make more money on fewer cars. In fact, they can make record profits. Group 1 Automotive reported that they nearly doubled their annual profits to a record $552 million, up from last year’s $286 million. This means that there’s a huge disparity between what customers think is happening and what is actually happening. Sure, there may be delays and if you need a car quickly, you may not have the options you want, but dealerships aren’t struggling the way they want you to believe.

This could be a warning for car buyers everywhere. Dealers may not want to negotiate anymore, but there’s room for the patient customer who is willing to work with supply chain issues. There may be a delay of a few weeks, but dealers do not have to charge extra for your patience.

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