Car buyers will need patience this summer as new and used vehicles are still slow to arrive on the lot.
The car buying experience will feel more like a layaway purchase than a quick trade-in deal, as most cars that land on the lot have been preclaimed. Pre-ordering has become the norm, said Erin Sparks, director of marketing at DeNooyer Automotive Family.
The dealership has Ford and Chevrolet dealerships in the Kalamazoo area. Sparks said it saw sales drop about 23% from pre-pandemic numbers.
“But when you look at the lot, it doesn’t look like 23%,” she said. “It looks like a much higher percentage.”
Concession deliveries are slow to recover despite having tripled since the start of the year. The sticking point is that in January, DeNooyer would receive five vehicles per week. Now they get about 15.
Before the pandemic, the dealership received trucks that delivered entire rows of cars to fill the lot, Sparks said.
This backlog starts in car factories. Ford’s April sales report showed a 10.5% drop from 2021 in total sales. This is a 1% improvement over the previous year. Ford pointed to the percentage point as a sign of expanding market share and improving dealer flow.
Ford said April sales outperformed competitors, taking a 13.8% total share of sales. The automaker also said April retail orders were filled at record rates representing 50% of April retail sales.
Pre-ordering a vehicle is no longer just for those looking to customize. The relationship between salesperson and customer is changing from walking around the lot and taking test drives to customers calling in with a request and reserving a car that may not even be in Michigan yet.
“When these vehicles are delivered here, they never really hit the ground,” Sparks said.
The logistics of getting that vehicle reserved can vary the delivery time from weeks to months, Sparks said.
The summer of 2022 is shaping up to be better than last summer in terms of lost production, said John Taylor, chairman of Wayne State University’s department of marketing and supply chain management.
Alternative vendors, flexible design and reduced functionality have boosted production this year.
“Time solves a lot of problems,” Taylor said. “Eventually, we will get through this. It still won’t be great for 2022 and 2023, but there is some improvement.
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Cox Automotive said new car sales in May grew at the slowest sales pace of the year, with data showing a 30% year-over-year decline.
The May report showed around 800,000 fewer unsold vehicles in dealer inventory than a year ago and 2.2 million fewer than in 2020. Certified pre-owned sales were also down 22% in May compared to a year ago, according to Cox.
The Cox report pointed out that high prices and weak demand were crowding out buyers. The two remaining categories of shoppers were those with immediate transport needs and wealthier households less concerned about prices.
Much like the real estate market, tight supply has driven buyers to pay more and go further – sometimes literally.
Michiganders would drive 380 miles to find a bargain on a used car, according to a nationwide survey commissioned by a Lexington-based Subaru dealership. It would be a road trip equivalent to going from Detroit to Rochester, New York.
That didn’t surprise used-car salesman Michael Porter. He recently brought in a customer from UP to buy an F-150 truck from his Wyoming, Michigan dealership, Select Auto Group. The customer then drove the six hours and 400 miles to get home in his new truck.
The used car market has skyrocketed throughout the pandemic. April showed some relief with average transaction prices pegged at $29,948, although that still represents a 22% year-over-year increase. Compared to pre-pandemic prices, used car buyers are paying 48% more.
Car owners are keeping their vehicles longer and lessees are buying back their cars to avoid the rush. As a result, the used cars Porter receives have more miles and require more maintenance than usual.
Thousands of dollars in repairs coupled with delivery prices that have doubled and tripled due to gas prices leave Porter’s dealership with about $1,000 in profit after a sale, he said.
Demand for used cars is also driving up prices at auction, he said. Big dealer chains have started stepping in to fill their lots and outbid smaller independents, Porter said.
All of these additional costs are passed on to the customer.
Porter said he sees a growing trend of “budget shoppers” coming in with a price range of around $8,000 to $10,000. With the market as hot as it is, he said he doesn’t have as much to offer them in this range anymore.
“Before, you could get a decent quality vehicle for it, something that could last you a few years,” he said. “But now this market is just crazy. An $8,000 vehicle three years ago is now a $12,000 vehicle.
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