Dealerships across the country are having a tough time meeting the demand for new vehicles. Car lots aren’t at full inventory capacity due to a worldwide shortage of microchips, creating low supply. During Covid, there was high demand for personal vehicles as people moved off public transit and into the driver’s seats of their own cars. What’s more, they bought more computers, tablets and cell phones than ever before. Cars, computers and phones all use the same microchip technology. The computer industry’s push for more market share means less available microchips for the automotive industry. The result is that cars are being bought faster than automakers can produce them. Inventory is at record lows in North America and vehicles are already spoken for before they arrive at the dealership.
Simultaneously, the low supply is happening at a time of high demand. With Covid restrictions loosening, customers are back in full force, economic recovery is strong, interest rates are low and savings are high due to government stimulus payments. These are all factors that are boosting sales and contributing to the empty parking stalls within car lots.
Low inventory has created interesting shifts in the auto industry. Customers are doing their car shopping online. Buyers are settling for different colours or options than desired. Dealerships are saving money – having less inventory means paying less interest on unsold cars (which might result in less inventory becoming the new status quo). Used car sales are way up. Vehicles returned at the end of lease agreements are more valuable, as are vehicles that are traded in. Some automakers are returning to analog features. Peugeot, for example, has replaced their digital speedometer with an old-school gage. Other automakers, like Ford and GM, have abandoned lower-priced vehicles altogether in favour of more expensive, high-end, fully-loaded ones. Prices for new cars are higher and deals are harder to find.
In the face of all this, how does a dealership incentivize a customer to not throw up their hands and give up? Use this one-two-punch: De-emphasize one thing while emphasizing another. De-emphasize the purchase price, creating inexpensive monthly payments with today’s incredibly low interest rates. Simultaneously, emphasize incentives like SmartProgram. Offer your car buyers our 1- to 8-year packages to safeguard their big investment from damage that can devalue it. Windshield chips, alloy wheel damage, interior upholstery rips/burns, dents, paint chips, scratches – all these are things that regularly injure vehicles, yet they are 100% avoidable with SmartProgram on your customer’s bill of sale. Do term-matching, offering to double the purchased term length, free of charge, to make the sale and bolster the customer relationship. For more information on these incentives, read our blog about incentives for new vehicles. If you sell used cars, click here for our blog about the best products for used vehicles.
It is an unprecedented time to be in the auto industry. Managing these current challenges in creative and inventive ways can bring amazing opportunities for dealerships and customers alike, establishing a positive “new normal” that benefits all parties.
Sources: New York Times, CTV News, Forbes - July 2021