Pent-up demand from coronavirus lockdowns has brought car and truck buyers back to the market, but once there, they may see little wiggle room on price. With limited inventory, dealers are often taking top dollar for the vehicles they do have.
For several weeks, the average industry gross, or the gross profit dealers get on new-vehicle sales, has been climbing rapidly. It stood at $1,028 for the week ending July 12, compared with just $404 a year earlier, according to J.D. Power. And it’s up from $353 for the week ending April 19, when the industry was in the midst of the coronavirus outbreak.
Keating Auto Group President Ben Keating has seen his dealerships’ average grosses climb, but he said “it’s not because we’re charging MSRP — it’s still a competitive market.”
There’s simply a lack of vehicles.
“In other words, when everybody can order everything they want, and every Ford dealer has that F-150 SuperCrew XLT, we all beat each other to death to get that customer’s business,” said Keating, whose group has 19 stores in Texas. Now, customers in the market for a new pickup will not find as many choices. “And so when the customer searches the Internet for the purple with pink-polka-dot-interior F-150, they only find one,” Keating added. “And they go in, and they buy it.”
Hence the rising average gross over the past several weeks.
“It is a very imperfect analogy that new cars in July are as scarce as toilet paper was in April in grocery stores,” said Tyson Jominy, vice president of data and analytics at J.D. Power.
As a result, average grosses and average selling prices are trending up since the height of the coronavirus-shutdown period — at a time of year when they would normally be trending down, Jominy