New car inventory has been a problem year round, compounded by the chip shortage that occurred in early 2021, said Joey Huang, a dentist by trade who has been a car dealer for more than two decades and chairman. from Great Lakes Auto Network. Huang operates five dealerships in Ohio under the Great Lakes name, selling brands such as Honda, Hyundai and Buick.
These stores have seen their stocks decrease. Huang gave the example of his Honda store in Akron. The dealership typically transports 450 to 500 new vehicles. As of August 24, he said, stocks were below 30.
“We are located right on the highway, right on Route 8. My land is on a hill, and all you really see is the sidewalk now,” Huang said. “It’s something like we’ve never seen before.”
Inventories of new vehicles are at record levels, said Lou Vitantonio, president of the Greater Cleveland Automobile Dealers’ Association in Broadview Heights. The association represents approximately 280 franchise locations in 24 counties in northern Ohio.
The pandemic has put pressure on the auto industry. There were massive closures early on, but there were also issues up and down the supply chain as businesses of all sizes struggled to find enough employees to manufacture and ship. pieces.
“Everyone is talking about the chip, semiconductor crisis. It’s one of the many parts of a vehicle that has to be there in time to start and continue operations,” said Vitantonio.
But demand remained strong, placing more emphasis on demand for newer used vehicles, from retail consumers and customers like car rental companies who are also struggling to purchase new vehicles. These used cars were also hard to find, which drove up prices.
Vitantonio has been with the association for 25 years and said he doesn’t remember a market like this.
“We have had bankruptcies. We had inflation. We have had bankruptcies in the manufacturing sector. We have had economic downturns. completely the opposite where we are limited in what we can produce, and what is available to the consumer drives demand not only in new and used cars, ”said Vitantonio.
The association tracks sales of cars, trucks and SUVs in an area of 21 counties in northeastern Ohio. So far this year, consumers in the region have bought 153,945 new vehicles in July, along with 143,932 used vehicles. This is an increase of about 18% year over year for new vehicles and about 13% for used vehicle sales.
Ken Ganley, who has spent over 30 years in the auto industry, also said he has never seen a market like this. Typically, its dealers try to hold stock for 60 to 90 days. It is up to seven to 10 days in many stores.
The Ganley Automotive Group, of which he is president and CEO, has 43 branches in Ohio, Pennsylvania and Florida, selling approximately 70,000 vehicles per year. Ganley said that typically around 60% of the vehicles the company sells are new. Today it is closer to 50-50, with used vehicle sales exceeding new ones in some places.
But customers get it, he said. They know they won’t see much in stock when they arrive, and they’re willing to wait or compromise on whatever they want.
One challenge that comes from not having so many new cars to sell is that dealerships don’t buy as many trade-ins, Ganley said. His company searched for used vehicles in other places, such as online auctions. They also buy more vehicles directly from consumers than in the past, even though those customers do not in turn buy a vehicle from a Ganley dealership.
“We will buy any car they want to sell us,” he said.
Dealers tap into their customer lists, reach out to former customers and let them know they’re interested in buying back these vehicles, Vitantonio said. Advertising has also changed to include a focus on used vehicle buybacks.
This market has been around for about a year, Vitantonio said, and customers are starting to expect it. Used car prices are starting to drop a bit, he said, noting that some of the demand has been met and customers are now realizing that there is a wait for new vehicles. But these prices are still high.
Huang said he sees customers getting, on average, $ 3,000 to $ 4,000 more for their trades this year compared to last year. And customers also get more equity on their leases.
There is always a fleet of vehicles on the road, said Nathan Lancry, president and CEO of Jay Auto Group. Their dealerships buy spare cars from customers or hire deliveries.
He said he believed the shortage of inventory was good for the economy, putting an end to the “throwaway mindset” that had prevailed for decades. Before the pandemic, there was a lot of new vehicle inventory, he said, and dealerships were aggressively pricing to keep that inventory moving.
Now the focus is more on customer satisfaction, and customers are excited about the process, he said.
“They place a higher value on the experience,” Lancry said.
And, despite the challenges of sourcing new and used vehicles, all of this demand means that the business is good for car dealers.
At Ganley Automotive Group, the company is in its 11th consecutive record year. Ganley said total revenue surpassed the $ 2 billion mark last year. Sales volume may drop, but profitability is strong. Dealers may pay more for trade-ins, but wholesale and retail value has also increased.
“Honestly, business has never been better,” Ganley said.