Post-pandemic car buying is on fire right now. Cox Automotive estimated that April 2021’s used car SAAR was 41.0 million, climbing by a half-million units over March’s figures, indicating that transactions in the used car market are continuing to climb. And without a doubt, car prices are rising to capitalize on the market demand. Compared to May of last year, used car prices are up 32%, using the TrueCar website as an indicator.
The used car market’s incendiary performance is driven both on consumer demand and the microprocessor chip shortage that’s delaying production of new cars. Both new and used car lots are struggling to fill the gaps.
Brian Moody is the executive editor for Autotrader. He said last week, “There’s really no way around it right now, the laws of supply and demand are at play and shoppers should be prepared to pay more when buying a car – especially if it’s a popular type of vehicle like an SUV or truck.
“Much like the housing market, the new-vehicle market is extremely competitive, making the impacts of the vehicle inventory shortage that much more challenging. Heading into Memorial Day and the start of summer, we expect it will only get more competitive in the near-term.”
More than four in ten car shoppers indicate they’re willing to pay over MSRP by as much as 12% to get the vehicle they want – an about-face from the times when keeping any gross profit at all was a challenge. But how can dealers prevent buyers from feeling like they’re being taken advantage of, whether they charge over MSRP or not?
Pivot away from the price
Moody gave advice for car buyers actively seeking a car. “If you’re even able to find the exact vehicle you want to buy right now, you probably aren’t going to see major incentives or deals abounding at your local dealership.” The times where salespeople strip away all the gross to make a deal have disappeared, and educated customers know it.
Focus the conversation on the vehicle being the right fit, and the dealership being the best choice for their vehicle purchase. When you can’t or won’t budge on the price – or if you’re charging above MSRP – allowing the conversation to remain on the selling price will frustrate shoppers.
Reveal truths about the market
It’s been a long time coming, but it’s finally a seller’s market. Dealerships should be empathetic to shoppers but unapologetic regarding the circumstances. When asked about a discount on a new Ford F-150, one salesperson told the customer that, unfortunately, pricing was non-negotiable. They said that if the customer didn’t want it, “there would be someone else right behind willing to take it at MSRP” since inventory was so restrictive, and management wouldn’t allow discounts.
It’s an easy strategy to employ in the current retail environment. Salespeople can maintain an empathetic position while the market bears responsibility for lack of movement on price, not the dealership.
Don’t cut corners on the transaction
At the crux of it all is the customer experience. Although vehicles are almost selling themselves at this point, salespeople can’t risk poor reviews or CSI scores due to sloppy transactions or cutting corners on processes. Consumers will be content to purchase at MSRP – or even higher, in some cases – if they believe the dealership is still taking great care of them.
Fast and knowledgeable communication, thorough explanations, early intro to F&I, transparent pricing, and a comprehensive delivery process are all still key components of a sale.
If the car buyer still feels cared for, it’s likely their feedback on the sales survey and online reviews will be remain largely positive, and that’s crucial for times when the market isn’t so hot.
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