As demand continues to climb alongside inventory concerns, could you be doing more to get ahead of it all? On today’s show, we’re pleased to welcome Brian Finkelmeyer, Senior Director of New Car Solutions at Cox Automotive, to discuss practices you can implement today and what you should be paying attention to.
Finkelmeyer says it’s a remarkable time for dealers across the country, as we have never seen a situation like this before. We’re running out of cars but profits are through the roof. In 2019, the average dealer had an average net profit of $1.4 million and in 2020 it improved to $2.1 million. Through the first six months of this year, the average dealer currently has an average net profit of $2 million.
I don’t think the days of 60, 70, or 80 day supply is anywhere in the near term says Finkelmeyer. He says he calculates an average of savings of about $2,500 to $2,700 dollars per car. He believes this ‘existing normal’ is going to be around for another six to nine months.
|Related: Why new vehicle inventory shortages don’t have to prevent you from gaining new customers|
Today, what’s happening is we have a 60 day supply but it’s different than what we’re used to. We have 30 days on the ground and then 30 days of incoming vehicles. Finkelmeyer says in some cases, 45% to 50% of vehicles that hit the lot, sell within the first week of being there.Asbury reported in their quarterly results that some dealerships have a 5-day supply of inventory.
The new car situation has had a direct impact on the used car valuation. Finkelmeyer believes there are great deals to be had in the used car market. The average gross on a used vehicle in the U.S. is $3,500.
For the second half of the year, Finkelmeyer says it looks a lot like the first half. We’ve hit a moment where the inventory shortage is having a direct impact on sales. Nonetheless, Finkelmeyer says the industry keeps turning out about a million new cars a month at very high margins. He believes that’s likely to continue. As we go into the new year, he thinks the big thing to watch is the adoption of electric vehicles, outside of Tesla.
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