Car Dealers See Inventory Levels Ramp Back Up

The days of empty car dealer lots could be coming to an end.

Easing supply chain constraints and steady production has increased vehicle availability, The Wall Street Journal (WSJ) reported Saturday (May 20), with some brands — Buick and Jeep among them — already seeing stocks grow heavy.

“We had times where you could have a helicopter land on my lot,” David Kelleher, president of a Pennsylvania-based dealership group, told WSJ, but he now sees inventory swelling.

“We need to enhance sales and stop ordering. Because of the interest-rate climate, we have to think differently now.”

According to the report, dealerships had roughly 1.8 million vehicles in transit or on lots at the end of April. That’s up 50% from the same period in 2022 — but still about half the inventory available in 2021, according to data from industry-research firm Wards Intelligence.

The WSJ also cites data from J.D. Power showing that buyers continue to pay historically steep prices, while discounting among car dealers is still far below pre-pandemic levels.

As noted here earlier this month, recent findings from the Bureau of Labor Statistics show the role auto dealers’ markups played in new car price inflation following the pandemic.

“With their significant part in the supply chain through maintaining inventory of cars awaiting sale, dealerships were able to increase vehicle prices — and their profit margins,” PYMNTS wrote. “The study found these markups to be a prime driver behind new-vehicle inflation for consumers over the past three years.”

The dealer-driven markups could be among the reasons why 64% of consumers reported being unlikely to purchase a car in 2023, per the January PYMNTS collaboration with LendingClub, “New Reality Check: The Paycheck-To-Paycheck Report.”

Consumers pointed to cars more often than other large expenses PYMNTS and LendingClub tracked, including leisure travel, gifts and luxury clothing, when asked about major purchases they would skip.

This purchasing hesitancy has also extended to the used car space. Last month, AutoNation reported a 21% decline in first quarter revenue of this year compared to the same period the prior year, representing a drop of $540 million.

The dealer has moved its focus from selling to service and customer-relationship building, a shift that was partially the reason behind AutoNation’s January purchase of RepairSmith. The full-service mobile automotive repair and maintenance solution, based in Los Angeles, has a large presence in the western U.S.