How the car inventory shortage is changing the dealer business

A dark, empty car dealer with low inventory

Car inventory shortages drive up prices, frustrate everyone, and disrupt the industry

If you’re like almost every dealer across the country, your lot’s looking a little… empty. 

Between chip shortages and plant shutdowns, nearly every major automaker has experienced some kind of production slowdown in the past two years. What started as a pandemic issue has since ballooned into a national car shortage with major economic implications. 

Dealers like you are selling fewer cars and that hurts—even if the average sale price is breaking records by climbing above $44,000 and markups are more common than ever before. But even higher margins and quicker sales can’t make up for an industry-wide 12% decrease in new-vehicle sales. 

These challenges weigh on dealers and customers alike, but they also usher in a fresh wave of elevated customer service and more efficient processes. The latest in digital auto retail technology can meet eager online customers where they prefer to shop, while helping dealers sell faster and more easily acquire new inventory. 

Here’s what you can expect—or are already experiencing—during the new and used car inventory shortage. 

Cars are leaving the lot in 1/3 the time

Whether it’s a bread-and-butter ICE car or an EV, cars that used to sit on the lot for months now sell within weeks. Down from 60+ to 20 days on the lot, cars aren’t remaining available nearly as long. 

Sure, it’s great to sell cars quickly and easily, without incentives or discounts, and often with dealer markups. Only once your stock is sold, inventory managers find it hard to restock. It’s increasingly difficult to even make reliable plans, since availability and buyer behaviors are unpredictable and inconsistent. 

It’s a bad situation for customers, too. They’re understandably frustrated when the vehicle they want is already sold by the time they make it to the showroom. 

Dealers who can successfully presell a car can still satisfy customers. You can sell a car that’s still on the truck en route, or even custom build a car and initiate a VIN-less deal. With cutting edge automotive digital retail software, it’s not only possible but practical and timely

This leads to the next point.

Customers can’t test drive, but preorders increase

If the car’s not there, you can’t show it off. Buyers hoping to answer questions and explore their preferences by getting their hands on the wheel are disappointed. But that doesn’t mean you can’t sell it. 

Perhaps surprisingly, 41% of recent shoppers remain confident enough to preorder their vehicles anyway. With online retail and virtual showroom software offering Facetime-style vehicle tours and interactive configurators, buyers are placing orders without even touching the gas pedal. 

Yes, it’s different and sometimes challenging to sell a car for a decent profit without letting a buyer get their hands on it. But it’s easy to simplify the process. Digital-savvy dealers embrace virtual reality-style shopping experiences to address this very issue. 

Whether it’s a factory build sheet or a VIN-less transaction with a deposit placed for an incoming vehicle, customers are happy to embrace creative ways to get their wheels. Dealers just have to make these options available. 

Used cars with higher mileages get more attention

The used car bubble is real, and the likelihood of it popping keeps stretching into the horizon. While used vehicles offer a reasonable substitution for many buyers, some will be turned off to the idea. And in many cases, used car transactions aren’t as lucrative to dealers. 

Given record-high sale prices for used cars, just stocking up inventory is a costly endeavor. And with more attention around higher-mileage vehicles (150,000 miles or more), the situation gets even more difficult to navigate. 

Future-proof dealers are finding ways to transition new-car shoppers into acceptable used alternatives and making satisfying profits while doing so. They’re getting smart about making it simple and attractive to capture new inventory with instant trade-in offers that get the deal moving sooner while building up inventories. 

They might even have an easier time selling warranties and service packages when odometers get further and further from zero. The average age of Americans’ cars has crested 12 years, making it clear that not only do cars last longer than decades past, but the majority of folks are happy to continue driving them. Chances are if you take a look at the dealer sales, service, and finance team’s own vehicles, that average age is roughly accurate. 

Shoppers are postponing their purchases

While guests have been flocking to dealers in search of their preferred models, the tides are changing. Almost half of surveyed consumers are ready to postpone their auto shopping until the chip shortage is history. Others are ditching their dreams of buying new and heading back to the used market. 

These customers aren’t necessarily lost, but it takes careful marketing to bring them back into the showroom once their models arrive. A careful understanding of their shopping history and auto preferences—as well as the right marketing data and campaigns—can make sure a dealer is top-of-mind once they’re back in the market. 

A simpler and more convenient way to shop improves their chances of converting, too. Digital auto retail solutions on a dealer’s website makes that even more accessible. The virtual showroom experience also collects valuable customer data such as which models are browsed and how long they’ve been shopping. These can be used to optimize marketing campaigns and even the in-showroom sales pitch. 

Car thefts are on the rise

Insurance industry research body Crash Course reports car thefts rising with the inventory shortage and inflated prices. The inventory shortage has driven staggering increases in theft rates across the nation: 16.5% nationwide but much higher in some states, such as 31% in New Jersey and a whopping 88% in Washington. 

Thieves are even stealing right from the factory, such as the case of seven Chevy Camaros nicked from a GM factory in Lansing. It’s a wake-up call to dealers to protect their own inventory. 

It’s also a compelling reason for buyers to tack on extras they once may have overlooked: security systems, VIN etching, GAP insurance, and the like. Dealers may find a reduced need to “Sell” these kinds of add-ons and an increased propensity for buyers to request them. Making it easy to add before penciling a deal serves both the buyer and the dealer. 

Dealers expect inventory woes for years to come

Some of the largest shipping ports are still experiencing delays in processing incoming shipments. Toyota, for example, is powering through numerous challenge

s beyond the pandemic: earthquakes, cyberattacks, pandemic surges and more. VW expects the chip and car inventory shortage to last well into 2024; BMW leadership agrees. 

The car inventory shortage is a double-edged sword. It leaves dealers scrambling to match buyers with vehicles, but it also makes for easy sales and higher prices for the models on the lot. 

Customers, though? They’re feeling all the pains of higher prices, fewer options, and longer buying journeys. But you, a tech-savvy dealer, can make the process painless by embracing innovative, easy-to-deploy digital auto retail software. 

The urgency and the ROI is clear: while the car inventory shortages won’t last indefinitely, they won’t be over next season, either. The time is now to embrace innovation to thrive during the shortage. It’s crucial to embrace a fresh mindset of a digital-first, customer-led car buying experience. Digital auto retail must be the engine of your sales vehicle, not just an accessory.

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