Welcome back to the CarDealershipGuy newsletter. Where I educate you on the auto industry before you can even finish your morning bowl of cereal.
- 📉 New Car Sales Drop Like a Rock
- 🎭 Masking The Truth
- ❓ Is Now A Good Time To Buy A Used Car?
- 🚗 Auction Car of the Week
- 📖 Articles I Read This Week
Read Time: 4 Minutes & 16 Seconds
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New Car Sales Drop Like a Rock
It is no secret that new car sales have not been doing so well. But just how bad are they?
In this weeks Cox Automotive report for new car sales in July, we got some numbers that show what's really going on.
You can see that the US is forecasted to sell around 1.12 million new cars in the month of July. That sounds pretty good! Unless you have some context.
For example, if we look back to June 2022 we are still down about 2% MoM. Meaning June 2022 is projected to sell more new cars than July 2022.
But if you zoom out even further you can see that in July 2021 almost 1.3 million new cars were sold. That is roughly a 13% YoY drop. OUCH!
On the plus side, Cox Automotive is predicting that the chip shortages and other supply chain restraints will ease up in the back half of this year. What does this mean? Well, right now new cars are selling for 102% of MSRP. So hopefully with chip shortages ending and supply chain issues easing then we can start seeing some regularly priced new vehicles here soon.
Masking The Truth
With new car shortages still lingering in 2022 dealers have been finding new ways to offer new vehicles to their customers.
One way they've been doing this is by buying like new cars that are in good condition but just a few years old and offering those as their new cars on the lot. Meaning that the new cars you see now are between 1 and 5 years old and the used cars are now usually older than 5 years old to help compensate for the lack of brand new vehicles in the market.
If you are a dealer currently selling these “new” cars or are planning to, here are a few tips to get you started:
- Buying cars at auctions will get you the car you want but it will come at a higher cost.
- If you are looking to get cars within the 1-2 year range your best bet are car auctions. But, this comes at a big cost. These cars will by far be the most expensive. This means you will either have to shrink your margins or charge the customer more, and they do not like that…
- Buying cars from places other than auctions will lead to higher margins for your business but you will get older vehicles.
- If you are looking for cheaper cars your best bet will be outside of the auctions at places like service drive, site-unseen vehicles, and or any other place you buy your vehicles that is not the auction. Buying from these places will lead to cheaper cars but they will be between 3-5 years old not your 1-2 that you would get from the car auctions.
- My advice? Do both.
- If you are looking to be somewhat of an overachiever the best thing for you and your business to do is a mixture of both. Start with the 3-5-year-old cars to increase your margins and profitability. Then start acquiring cars 1-2 years old from the auctions and have those available for your customers that want a newer car. A mixture of these two will provide the best dealership environment for you and your potential buyers.
If you want more detail on this take a look at the legend Dale Pollak talk about this in his article “Beware the Pitfalls of a ‘New Car Masquerade’ in Used Vehicles”.
This Weeks Newsletter Is Brought To You By Recurrent
It's been a big week for electric cars.
As US lawmakers prepare tax credits for both new and used EVs, and nearly every vehicle brand adds EVs to their lineup, dealerships are still exploring the best way to sell them. Especially used EVs, which naturally lose range over time.
Recurrent developed a condition report and VDP badge to add transparency and confidence when buying a used EV. Backed by over 100 million recorded EV miles and 10,000 active vehicles, dealerships use Recurrent to score cars at auction and educate their customers on the lot about EV batteries.
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Is Now A Good Time To Buy A Used Car?
For those of you who have been waiting to buy a used car until things calm down, you might soon be in luck. The finish line is almost here!
Here is what's going on in the used car market right now:
- Wholesale used car prices doing down
- Prices aren't hitting all time highs
- Summer "lull"
- Inventory levels are increasing at auctions
- Manheim data has shown that the first 6 months of this year have been one of the largest declines in used car prices ever seen
So whatever you have been doing. Whether it's not reading the news, avoiding Carvana, or blocking your car dealer's number. Just keep it up a little bit longer because in a few more months the time may just be right.
Auction Car of the Week
This is the 1970 Plymouth Hemi Superbird. The muscle cars of muscle cars.
This beauty is 1 of 135 ever made and has a 426ci HEMI V8 engine that will knock your socks off.
And it just sold for $1,650,000.00 at the Barret-Jackson Las Vegas show.
IDK about you but that is a whole lot of dough!
Come check it out on the Barret-Jackson website to see all the muscle that this muscle car has to offer.
Articles I Read This Week
- At least someone in the auto industry was able to make money.
- With all the demand for chips the industry is projected to reach massive valuations.
- Looks like small town America is tired of auto plants.
- If you drive one of these cars, I am sorry. List of most boring cars.
- That Ford Bronco you waited months to get might have an engine issue...
Thank you for joining me again here on the CarDealershipGuy newsletter. See you next week!
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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.