Car dealers increasingly worried about the economy

New car supply improved slightly, but the survey showed that supply did not recover as much as dealers wanted.

Approximately 71% of respondents said new vehicle inventory levels for the brands they represent are not meeting demand. Several respondents independently pointed out that the mix of models they are getting is out of alignment or out of line with the market.

Germaine Farkas estimates his dealership’s revenues will rise by 6% in 2023 due to rising new car sales, fueled by increased production of the Honda brand.

“We believe production will recover,” Farkas said. “At the moment, I don’t think it will be at the same level that manufacturers are suggesting, but we are seeing an increase.”

As the supply of new vehicles improves, it’s clear that dealers have started to pull back the increases in sticker prices that have continued over the past few years. A quarter of his respondents in the 2023 survey said they continue to charge markups, and the most common markup rate he has is 5% or less. In the 2022 survey, 38% of respondents said they were increasing prices, with the most common value increase rate for him ranging from 6% to 10% over the norm.

Nearly half of the 2023 survey respondents expect inventories to return to meet demand in 2024. Nearly a quarter expect it to happen by the end of the year.

Used-vehicle inventory also remains hard to come by, according to Ted Marshall, a Marshall-Ford dealer principal in Philadelphia.

Buying and retailing used cars is becoming more difficult not only because of limited supply but also because it’s hard to find cars with reasonable acquisition prices, Marshall said. He pointed out that dealers were holding inventories of used cars purchased wholesale at prices higher than current retail prices.

“We are selling [used] You can take some losses, and if you go to auction, you can take huge losses,” he said.

With cost pressures mounting and margin concerns mounting, some dealers are looking for ways to improve operational efficiencies, says Stephen Dietrich, partner at Denver law firm Holland & Knight. . His dealer customers have been looking at all costs since the beginning of 2023 and are more cautious about what they spend their money on, he said.

“They’re not wearing belts,” said Dietrich.

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