OT: People in new auto sales; a few random curiosity questions

[horshack.sixpack]

1) Are salesmen surviving on orders?

2) If so, is it comparable or better revenue than when lots were full of inventory?

3) Being that dealers are saving on floorplanning costs and everything is pretty much sold when it hits the lot, do you see dealers still wanting to fill up their lots as soon as possible or is this the beginning of a big shift in how new cars are bought/sold?

 

[Moondawgg]

It all depends whether or not you get the Truecoat

 

[Drebin]

1) Are salesmen surviving on orders?

2) If so, is it comparable or better revenue than when lots were full of inventory?

3) Being that dealers are saving on floorplanning costs and everything is pretty much sold when it hits the lot, do you see dealers still wanting to fill up their lots as soon as possible or is this the beginning of a big shift in how new cars are bought/sold?

It's a pendulum swing just like everything else. Supply and demand. We will eventually see new car inventories again.

 

[mstateglfr]

Ha, this is exactly what my wife and I talked about a few months ago.

We bought a new vehicle even though I really didnt prefer that and what we selected was probably 8th on my list of what I want.
Anyways, we had to choose between 12 vehicles of the same model and waited 2 months for the vehicle. First off, all 12 were either the fully loaded or almost fully loaded options. There were no base options, no second level options, and no third level options. Secondly, all were pre-sold within a few days of us choosing which we wanted.

There was no incentive for the dealer to even bring in base level or second level trim options because they were all going to sell out early, so why not maximize what they would make with the limited inventory? Sucks from a consumer perspective, but I get it from the dealer's perspective.
We did 95% of the work- there were no new cars on that lot the couple times we were in and when I would drive past. I really dont understand what the salesmen were doing all day...maybe posting on SPS?

 

[horshack.sixpack]

It's a pendulum swing just like everything else. Supply and demand. We will eventually see new car inventories again.

If I'm a new car dealer and don't have to spend any money on floorplanning, I think I'd prefer to not have a huge car lot full of inventory and just fulfill orders. I suspect you are right because it would take all dealers to agree on a new model because we aren't very patient people. As soon as one lot stocked up, they would get overrun by folks who had to have it now(car died), or felt like they did.

 

[horshack.sixpack]

Ha, this is exactly what my wife and I talked about a few months ago.

We bought a new vehicle even though I really didnt prefer that and what we selected was probably 8th on my list of what I want.
Anyways, we had to choose between 12 vehicles of the same model and waited 2 months for the vehicle. First off, all 12 were either the fully loaded or almost fully loaded options. There were no base options, no second level options, and no third level options. Secondly, all were pre-sold within a few days of us choosing which we wanted.

There was no incentive for the dealer to even bring in base level or second level trim options because they were all going to sell out early, so why not maximize what they would make with the limited inventory? Sucks from a consumer perspective, but I get it from the dealer's perspective.
We did 95% of the work- there were no new cars on that lot the couple times we were in and when I would drive past. I really dont understand what the salesmen were doing all day...maybe posting on SPS?

You are seeing this in all industries that are hit by chip allocation. In the IT industry, they are focusing on using chips in higher end equipment rather than low margin equipment, which makes sense. If you can build 10 of something no reason to do it at a loss or reduced profit. The car manufacturers are using their chips to build higher end. They simply don't have enough to build everything so base models suffer. I did see where XLT is now the most popular model F150 down from Lariat before the economy slowed.

I have had customers who were budgeting for one level of gear, pay 2x and 3x of that just to get a higher end model because it is in stock. I don't quote ETAs just tell them that when they order it will put them in line, and until they do they are falling further behind.

 

[Drebin]

If I'm a new car dealer and don't have to spend any money on floorplanning, I think I'd prefer to not have a huge car lot full of inventory and just fulfill orders. I suspect you are right because it would take all dealers to agree on a new model because we aren't very patient people. As soon as one lot stocked up, they would get overrun by folks who had to have it now(car died), or felt like they did.

This is exactly my point. When dealers stop maintaining inventory, somebody is going to go against the grain and stock up (as soon as they are able to), and the market will respond accordingly. Then everyone else will follow the leader. Pendulum swing.

 

[Perd Hapley]

There is always going to be a fairly large demographic of buyers that won’t buy anything without test driving first. Those folks are all on the sidelines right now. So yeah, I think in order for dealers to get back to maximum profitability, their lots will have to fill back up….with options across the cost / profit margin spectrum.

The other thing is that no matter how many orders the dealers take, they don’t get paid until they deliver the vehicle. And right now automakers are all still running well short of line capacity due to parts shortages and other logistical issues. That is the bottleneck. This means dealers are going to continue to have profits capped until the supply side catches up. There is no world that exists where dealers can sell 30-40% fewer vehicles and still be able to match profits to the pre-COVID times, no matter how much floorplanning overhead is reduced and no matter how much additional margin per vehicle they are getting due to selling only high end trim grades.

Profitability in the auto industry, whether its on the sales side or the manufacturing side, is a volume game. Always has been and always will be. Margins are too thin to do it any other way.

 

[garddog]

Most likely orders for the foreseeable future. Back in the 70's and 80's everyone ordered their vehicles. Dealer kept a few for test drives. Nothing new to see here. Whichever way the manufacturer thinks makes the most profit is how it goes.

 

[The Cooterpoot]

With interest rates going way up, incentives will come back into play. Inventories will grow unless production stops. China will be fully open once they get past this current Covid explosion they've created. The electric move will keep things slow awhile though.

 

[mstateglfr]

Curious to hear views on dealership laws from voices of The Pack.

Tesla can't sell in my state because a state law prohibits cars from being sold by a manufacturer.
Heck, they were actually banned from even holding rest drives back in 2014.

Dealers claim the only way to ensure a fair and equitable transaction is to buy thru them.
Um...what?

I read that auto taxes are one of, if not the, biggest tax for the state. So that's a lot of financial incentive for legislators to keep everything the same.

 

[TrueMaroonGrind]

The lots in my area are filling up again but it all looks like used inventory. That’s a good sign that they are actually able to get cars on their lots.

I would imagine there still won’t be new inventory on lots until the end of this year at the soonest. Let’s hope it starts to stabilizes when they feel some pressure from a slow 1st quarter. It’s about time cars get back to normalish.

 

[Wesson Bulldog]

1) Are salesmen surviving on orders?

2) If so, is it comparable or better revenue than when lots were full of inventory?

3) Being that dealers are saving on floorplanning costs and everything is pretty much sold when it hits the lot, do you see dealers still wanting to fill up their lots as soon as possible or is this the beginning of a big shift in how new cars are bought/sold?

We've sold at sticker price on new vehicles since mid-2020. Super Duty trucks and F-150s have sustained us until late summer of this year when we flat ran out. Pre-owned trade-ins and buy-backs plug the holes; however, with fewer new vehicles on the lot, traffic is way off. New brings people on the lot, if nothing else but out of curiosity. Our buyers like to see and touch, hoping something will catch their eye. This ordering B. S. that Ford has gone to has dang near ruined us, but our service, parts and quick lane departments are wide open.
So to answer your question about surviving on orders, yes, we have survived when we have orders delivered and have had some really good months over the past 2 + years. The past 90 days have been tougher because of interest rate and new vehicle price increases. Revenue is down. Lot traffic is way down. Yes we want more inventory, and I don't forsee lots ever filling back up like they were around here in Brookhaven.

 

[ababyatemydingo]

Here are a couple of videos that shed light on the coming market

 

[Eleven Bravo]

1) Are salesmen surviving on orders?

2) If so, is it comparable or better revenue than when lots were full of inventory?

3) Being that dealers are saving on floorplanning costs and everything is pretty much sold when it hits the lot, do you see dealers still wanting to fill up their lots as soon as possible or is this the beginning of a big shift in how new cars are bought/sold?

Not in the car business, but sold John Deere equipment for years. Tractor business is pretty similar to auto business. We had a nice inventory when COVID hit. We sold much of that inventory pretty quickly. My location typically sold 50hp and larger tractors. My “sweet spot” was between 65-125 hp tractors. Prior to COVID, if I didn’t have a tractor in my inventory I could check inventory at the other 26 dealers in our company and many times I could find a tractor at another store and transfer it and deliver to the customer pretty quickly. That didn’t last long as we exhausted inventory quickly. Even If I didn’t have it in inventory I could order from the factory and have it within 3-4 weeks. After COVID, that 3-4 weeks became 6-8 months. The problem was that Deere couldn’t get electronic parts from China and delays became a thing. We couldn’t even get lawn mowers. When you are a salesman working in commissions, it’s tough to make a living when you have nothing to sell.

 

[Perd Hapley]

Curious to hear views on dealership laws from voices of The Pack.

Tesla can't sell in my state because a state law prohibits cars from being sold by a manufacturer.
Heck, they were actually banned from even holding rest drives back in 2014.

Dealers claim the only way to ensure a fair and equitable transaction is to buy thru them.
Um...what?

I read that auto taxes are one of, if not the, biggest tax for the state. So that's a lot of financial incentive for legislators to keep everything the same.

That same state law exists in many states. The purpose is to prevent manufacturers from opening their own dealerships and having an unfair advantage over “resellers” (traditional dealerships) of the same product by being able to undercut them on price due to not having to cover a resale markup.

In Tesla’s case, it’s kind of pointless because they have no private dealers that they would be competing against. As such, many states have made exceptions to said laws and allowed limited numbers of Tesla storefronts to open - all to the chagrin of private dealerships of non-Tesla cars throughout those states. Slippery slopes and what not.

Overall, there’s a bit of concern about competition but a lot more concern about non-Tesla dealers making less money. No OEM in the existing manufacturer-dealer model is going to ever blow up that infrastructure to try and sell direct. There would be way too much front end cost to start from scratch with literally thousands of brand new storefronts. Not to mention, far more regional sales volatility and risk. Right now the manufacturers have guaranteed buyers and can more or less shift seamlessly as certain dealers over-perform or underperform. The whole law is aiming to prevent something from happening that, at this point, would never happen in the first place.

 

[greenbean.sixpack]

The lots in my area are filling up again but it all looks like used inventory. That’s a good sign that they are actually able to get cars on their lots.

I would imagine there still won’t be new inventory on lots until the end of this year at the soonest. Let’s hope it starts to stabilizes when they feel some pressure from a slow 1st quarter. It’s about time cars get back to normalish.

I'm late 50s, I remember car lots in the 80s being full.

 

[IBleedMaroonDawg]

Where's the best place to sell a truck from say 2017 model Nissan extra long bed with a towing transmission and gears. Is it better to sell it to the dealership or a person, even though selling it to the person will likely take much longer. I'm asking because I have some money in this truck but all I ever hear is different advice from who ever I ask and I was curious what you were going to say

 

[ababyatemydingo]

Where's the best place to sell a truck from say 2017 model Nissan extra long bed with a towing transmission and gears. Is it better to sell it to the dealership or a person, even though selling it to the person will likely take much longer. I'm asking because I have some money in this truck but all I ever hear is different advice from who ever I ask and I was curious what you were going to say

Always gonna come out better selling to an individual. Dealers are gonna dealer. Used prices are falling, though. Time is not on your side right now. Unless you can find a sucker that is looking for your exact model and color. Prices will fall through 2023. Dealers are preparing for that. They're also preparing for a price recovery in 2024

 

[The Cooterpoot]

Always gonna come out better selling to an individual. Dealers are gonna dealer. Used prices are falling, though. Time is not on your side right now. Unless you can find a sucker that is looking for your exact model and color. Prices will fall through 2023. Dealers are preparing for that. They're also preparing for a price recovery in 2024

Not happening in '24 IMO. The electric push, higher unemployment, and continued high interest rates are going to be issues headed into '24.

 

[garddog]

Where's the best place to sell a truck from say 2017 model Nissan extra long bed with a towing transmission and gears. Is it better to sell it to the dealership or a person, even though selling it to the person will likely take much longer. I'm asking because I have some money in this truck but all I ever hear is different advice from who ever I ask and I was curious what you were going to say

There isn't a good place to sell that truck. Nissan, long bed, towing gear, mods. Stick it on Facebook and Autotrader and pray.

 

[IBleedMaroonDawg]

There isn't a good place to sell that truck. Nissan, long bed, towing gear, mods. Stick it on Facebook and Autotrader and pray.

I bought it thinking I was gonna end up pulling a bay boat to the coast and major reservoirs here in Texas. Unfortunately that has not worked out but it has only 60,000 miles on it and the paint is great just had a few dents so it has some value still. Thanks guys, I thought this would be the case but I just wanna make sure because it seem like every dealership around here was wanting to buy it from a few months ago after I priced it on Kelley Blue Book.

 

[garddog]

A dealer will buy it, but it will be bottom dollar. That truck is a work truck, No warranty. Only certain folks with a need will want it.

Buying for hauling and you want to trade every few years, stick with diesil. Ford, Ram, or Chevy are easy trades or resale.