‘Selling Inventory as Fast as We Can Get It’: Dealers say service, sales are setting records
In the wake of the COVID-19 pandemic, car dealerships are sanitizing more, employees are masking up and buyers are given more options like curbside pick up and delivery.
Adapting to the pandemic has been detrimental for some businesses, but car dealerships say they are thriving and are seeing increased vehicle sales and online purchases.
General Sales Manager Paul Chauvette at Williams Chevrolet in Traverse City on U.S. 31 South said business hasn’t slowed down. In fact, July and August were record months for the dealership’s service department and sales have “remained strong,” he said.
“I thought we were heading into another 2008 or 2009, but that wasn’t the case,” said Chauvette, whose company sells Kias, Hondas and Chevrolets. “I didn’t expect it to be as good as it is. I don’t want to brag about it, because I know there’s a lot of businesses out there that are really, really having a tough go with it. A lot of restaurants and mom-and-pop places are having a hard time.”
Chauvette attributes the increase in sales to low interest rates – which fell from 5% to 4.73% on average for a 36-month used car loan – and “pent-up demand” after Michigan car buyers were confined to their homes during the pandemic.
“People always need cars,” Chauvette said. “I think there is a lot of money in people’s hands right now. It makes people more comfortable.”
As the pandemic took hold many found themselves unemployed, but the federal government sent out stimulus checks between $1,200 and $2,400 to taxpayers.
At home with money in hand, car buyers took to the internet.
Online car sales at Serra Traverse City spiked 25% since the shutdown in March, according to General Sales Manager Mike McFarlan.
“We’ve had to sharpen our skills and get good at conducting business online,” McFarlan said. “I think it’s the way that most customers have been used to doing business. It’s like Amazon, for example – you find what you like and click the buttons and it shows up at your door. And that’s what we’ve tried to provide our customers.”
The upward trend with online buying has pushed dealerships to invest in new software that helps with about 90% of the online financing. Employees are becoming more tech-savvy and active with customers through online chats.
“They can literally put together their own deal,” McFarlan said. “We can jump in and take over where they leave off.”
The online car-buying trend has been in the making for the past several years, but the pandemic pushed it in motion, according to Bill Marsh Jr., co-owner of Bill Marsh Automotive Group.
“That’s where the whole industry is going,” Marsh said. “That’s where retail is going: making it easier and easier for customers to do business.”
In the past when a car buyer called the dealership, one of the first questions his staff was trained to ask was, “When would you like to come and see it?” Now they ask, “How would you like to experience this car? Would you like me to bring it to you or would you like me to do a virtual walk around and send you a video?”
In the beginning of the pandemic, dealerships didn’t have much option but to move their operations online due to a state mandate to shutter businesses, leaving showrooms void of customers and employees. But customers quickly embraced the convenience of doing business online, which involves almost no person-to-person contact and not much haggling.
“We met a customer one time at the rest stop area at the (Mackinac) bridge coming from the U.P.,” Marsh said. “People today don’t want to spend hours at a dealership trying to buy a car.”
Marsh has seen a double-digit increase in online sales since the pandemic and as much as 10% of his customers opt for deliveries.
“It may not seem like a lot, but we’re selling over 500 cars a month,” Marsh said. “We hardly ever did that before the pandemic.”
Marsh, who has two stores in Traverse City and one in Kalkaska, says he expects the online buying trend to continue as the next generation of consumers log on to purchase a vehicle.
“We are even seeing people in their 50s, 60s and 70s as well,” Marsh said. “Some people will surprise you.”
Vehicles sales are up across the board in northern Michigan, but used-car sales are doing even better.
According to Fox Motors General Manager Tom Gordon, the Traverse City dealership has been setting all-time records for used cars sales, which he credits to the federal stimulus.
“I don’t think it’s any secret as you talk to other retailers, anything that makes you feel good, or kind of lends itself toward your personal freedom seems to be popular, whether it’s hot tubs or travel trailers, he said. “And cars are certainly at the top of that list.”
In June, used car sales nationwide rose 17% above the pre-pandemic forecasts, according to market research company J.D. Power.
At Serra, McFarlan said there has been a “significant shortage” of used cars. He points to the lack of new car inventory, which has been affected by vehicle manufacturers and parts suppliers worldwide shutting down production during the pandemic.
Several companies shifted gears and started producing ventilators and sanitizer instead of vehicles to help fight the pandemic, creating a shortage of new cars and parts.
With the lack of new vehicles rolling off the assembly line, consumers turned to used vehicles.
“The used car market has been very, very strong,” McFarlan said. “The supply is a little less than what the demand is. There is a shortage of used cars and they have been hard to get.”
Serra’s general sales manager expects the hot used car market to continue as long as there is inventory.
“We don’t expect it to change anytime soon,” McFarlan said. “It will be into the last quarter of this year before we see our new car inventory levels get up to what they were and what they should be. If there aren’t enough new cars to buy and people aren’t trading in their used cars, that creates a shortage there as well.”
Alan Wolschlager and his son opted out of buying online and preferred to make the one-hour drive from Irons, Mich. to Fox Motors in Traverse City to purchase a used car.
He said the November election, rather than the pandemic, was a motivating factor to buy a new vehicle.
“He has a long drive to work, so this will save him money in gas,” said Wolschlager. “If Biden wins, we know gas prices are going up.”
As he waited for his son to finalize some paperwork inside the dealership, he walked around the car lot.
“There really aren’t a lot of options,” Wolschlager said, looking at several vacant spaces.
The high demand has forced Fox Motors to shift its marketing strategy to encourage buyers to trade in their old vehicles.
“We’ve been just overwhelmed by the response,” Gordon said. “We’re actually aggressively looking for inventory because inventory hasn’t kept pace with demand. And nobody saw that coming.”
At Williams Chevrolet in September, there were signs that some of the old ways were returning to the dealership. More than a half dozen sales people donned with masks accompanied customers around the used car lot.
“We’d like to see (COVID-19) go away, because obviously it’s a horrific thing that’s going on with all the deaths,” Chauvette said. “I hate to give it credit, like it’s a great thing, because it’s not.
“But as far as business goes, we’ve been blessed in the automotive business. I hear that all around from other dealers. Used car sales are way up and new car sales are cruising right along. We’re selling inventory just about as fast as we can get it.”