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U.S. Car Dealer Profits Reaching Historic Levels Amid Vehicle Shortage

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Since the onset of the COVID-19 pandemic last year, used car sales and average payments have skyrocketed. Meanwhile, certified pre-owned vehicle sales reached an all-time high last month, and Ford dealers have been able to reap the benefits thanks to the automaker’s brand new Blue Advantage program. Couple these factors with massive new vehicle production cuts automakers like Ford have been forced to make in recent months because of the semiconductor chip shortage, along with a resulting vehicle shortage, and we’ve got the perfect recipe for high levels of dealer profits.

Because of the vehicle shortage, customers are being forced to pay full price for new vehicles in many cases as demand continues to far outweigh supply. “I’m selling about 150 percent of what I have on the ground,” Atlanta-based GMC-Buick dealer Mike Bowsher told Reuters. “We are selling stuff so far up in the pipeline that they’re putting money down on ‘in-process,’ which is in the plant. I’ll take this till I’m six feet under. Customers are coming in just saying, ‘I’ll take it, full sticker, get it ready.’ It’s nuts.”

However, not everyone is celebrating, as it seems that the new vehicle shortage is only getting worse and may actually lead to a huge problem down the road. “They think it’s a light at the end of the tunnel, but it’s a freight train,” Dearborn-area Ford dealer Jim Seavitt said. “I’ve got 150 cars on the ground. I’ve got maybe 30 cars coming next week. I sell 225 a month. Why would I be rejoicing right now?”

Regardless, at least in the short term, dealers are enjoying the surge. The second-largest U.S. chain – AutoNation, Inc. – nearly tripled its gross profit per vehicle last week. The only question is, with the chip shortage expected to last through at least the end of the year and possibly longer, will there be any product left to sell in the coming months?

We’ll have much more on the chip shortage and its effects on dealers soon, so be sure and subscribe to Ford Authority for continuous Ford news coverage.

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Written by Brett Foote

Brett's lost track of all the Fords he's owned over the years and how much he's spent modifying them, but his current money pits include an S550 Mustang and 13th gen F-150.

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7 Comments

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  1. I have wondered where dealers find there sales people. They [the sales people] don’t seem to be able to hold down a job for any period of time, in fact they seem to go from one dealership to another, one mfg to another, always spouting, “These xxx vehicles are the best, I can get you a great deal….”. So very few have any product knowledge, in fact, often the customer knows far more about the vehicle than the sales staff! In many dealerships, they have employed a new system, the “product expert” on a given model! Why? because those they hire to sell their stock are either stupid, or lazy. Now that there is a shortage of vehicles (temporary), the lazy will be rewarded with lots of high profit sales, further cementing the cycle. It would be nice if a dealership had a professional sales force, with very little turn-over-a sales force that actually took care of their customers. The situation may be good for ford, and the dealerships, but it’s bad for consumers in several ways, higher prices, less selection, and the continuation of poor sales people at most dealerships.

    • Where do you live that the customers tend to know more than the salesmen and how do you come to the conclusion? In my experience as a salesman, I knew more than any customer I sold vehicles to with very few exceptions (used non-Ford vehicles). Is that what you’re referring to?

  2. I agree there are some poor sales people out there, it’s a pretty unfair generalization to throw out the “most” sales people. As a dealership’s resident nerd, I’d challenge anyone to become a product expert on the 176 different Transit configurations (actual figure) and their options as well as the full factory lineup and do so with limited training from the manufacturer and rarely having the product actually there on site to learn from. It’s pretty easy to be the expert on A, B, or C, not so much when you start getting into the Greek alphabet.

    I’m not exactly sure what qualifies dealers as making these outrageous profits. Being in Metro Detroit, nearly all of our customers are employees/family/friends of Ford. Plan pricing=set pricing by the manufacturer along with manufacturer’s rebates means dealers really aren’t out there setting their own prices. Even with used or certified vehicles, these things are going for so much wholesale, the margins can’t possibly be as high as they used to be or you’d have people paying sticker for used vehicles! I might understand AutoNation stores reporting big profits, they aren’t in employees’ backyards, but as far as Metro Detroit goes, I just don’t see the dealers reaping the rewards as much as this article implies.

    What they do share in is the huge drop in inventory and snails like pace of replenishment. God speed to anyone on either side of the sales desk!

  3. Very true! My dealership had its best single month in its history in March. Our typical month between 10-12 salesmen is around 140 vehicles. I was told our best month had previously been 156 vehicles. Last month, we sold 202 vehicles.

  4. I’ve watched as prices have climbed and dealer supply has dwindled. My local Ford dealer has always kept a huge inventory of Ford trucks. Just the other day they had just 11 F-150s on the lot. With real estate going crazy also I fear a crash coming before long..

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