No-interest, seven-year loans did the job.
Maybe even a little too well.
Now, some dealers who worried in March about business evaporating instead fear they’ll run out of the pickups their customers are clamoring for.
“The pipeline is very dry,” said Mike Maroone, CEO of Maroone USA, which operates five stores in Colorado and one in Florida. Maroone’s stores have only a 30-day supply of their top-selling Chevrolet Silverado.
“That is a problem for us,” he said.
Pickup inventory at General Motors dealerships was already slimmer than usual in the aftermath of the 40-day UAW strike last fall, but Ram dealers also are feeling inventory pressure. GM and Ram have been particularly aggressive with incentives since the coronavirus crisis began.
With North American auto plants closed since mid-March to protect workers from contracting COVID-19, the most sought-after vehicles have become tough to find. Some dealers say they are starting to run short on full-size pickups as a result of the generous financing offers rolled out as the coronavirus pandemic torpedoed the economy.
Because of the industrywide shutdown, light-duty pickup inventory in the U.S. could fall to 400,000 by the end of this month and plunge to 260,000 by midyear, according to J.D. Power. That’s compared with an inventory of more than 700,000 in May and June of last year.
“The key is to get factories open and start running light-truck plants (pickups, crossovers, SUVs) at three shifts a day because once the virus abates, high days’ supply figures won’t matter; it will be unit levels that will,” Morningstar said in a report in April.
The 0 percent, 84-month offers the Detroit 3 started in March have been incredibly effective, even as unemployment continues to rise.
More than a quarter of financed new-vehicle deals in April involved no-interest loans, according to Edmunds, up from just 4.7 percent of March transactions. And not only did 81 percent of April auto loans have terms of 67 to 84 months, but the average monthly payment and amount financed increased at the same time.
The shutdown feels familiar to GM dealers who last fall had to put orders on hold during the strike.
“It’s very similar, except coming into the UAW strike, we had adequate inventory,” Maroone said. “Coming into this disruption, we had not yet recovered from the strike. We’ve been taking active allocations, but they’re just stuck in the system right now.”
Silverado inventories averaged 82 days’ worth in March, compared with 120 a year earlier, according to Morningstar’s report, which cited Ward’s Intelligence data. Ram pickup supplies fell to 114 days from 134. Ford, which has limited 0-for-84 financing offers to 2019 models, went the opposite direction with the F-Series, as days’ supply rose to 111 in March from 84 a year earlier. But if the shutdown continues much longer, Ford dealers say they, too, could feel a strain during the summer months.
“The key question,” said Steve Kalafer, CEO of Flemington Car & Truck Country in New Jersey, “is when the gates open, how quickly can they get them to us? Customers want selection. They don’t want to settle for something.”
Inder Dosanjh, dealer principal at Dosanjh Family Auto Group, which has 17 dealerships in the San Francisco Bay Area, said he already is feeling the pinch on Ram and Silverado inventory.
“We need to start seeing cars by the end of June,” he said. Otherwise, his stores will run out of those pickups. As of last week, they had 60 days’ worth.
Steve Wolf, dealer principal at Helfman Dodge-Chrysler-Jeep-Ram-Fiat in Houston, said he has enough Rams on the lot for now and likely won’t have a problem if production resumes around mid-May. But shortages could arise if the production suspension lasts longer than that, he said, especially for Ram’s most profitable high-end trims.
Wolf said personalized customer orders for pickups will increase during the production pause as customers can’t find what they want on lots.
“Sold orders are going to get more predominant as people come in and they want a certain truck, and it’s not out there,” Wolf said. “I tell customers every day, ‘Mr. Customer, I know you want a blue truck with tan interior and this stereo and that screen and a certain type of roof and wheels. It doesn’t exist. So you either need to make some compromises on what you want, or let’s order one from the factory.’ ”
Vara Chevrolet in San Antonio had 31 crew cab Silverados in the Custom trim level — its bestseller — on the lot last week and usually sells 30 to 40 a month, said David Vara, the general manager.
“We’re going to blow through that pretty quickly,” he said. “That’s the concern that I have. We’re going to have other trucks to sell, but that’s one of our big-ticket items.”
The store already ordered more than 50 of the pickups, which are waiting to be built, but “I don’t know when we’re going to see them,” he said. “I’m glad we have what we have, but it’s going to get tight pretty soon.”
Maroone doubts desired inventory will come as early as June. July seems more likely, he said. His stores had 28 Silverados in transit last week and 257 more on order that haven’t been built.
Every Chevy dealer wants more pickups, Maroone said. “You might trade a Silverado for a Silverado,” he said, to get the configuration a customer wants from a nearby store, “but you’re not going to trade a Silverado for a Malibu.”
Meanwhile, dealers who sell some other brands are flooded with product right now. Ryan Gremore, president of O’Brien Auto Team of Bloomington-Normal in Illinois, said the group’s Mitsubishi, Hyundai, Nissan, Kia and Honda stores have full lots.
If they could, his stores would sell more of the Kia Telluride and Hyundai Palisade, which are out of stock. Overall sales at his Hyundai and Kia dealerships have been stable despite the sudden economic downturn.
Some of his customers have an immediate need for a new vehicle, while others are simply undeterred by the pandemic. They make an appointment and quickly buy the vehicle.
“These people are interested in the product. They’ve been cooped up, and they’ve done their research,” he said.
During the first half of April, the group sold about one vehicle a day at each of its five Illinois stores.
“The first 15 days of April were just gut-wrenching,” Gremore said. “There was no business. It was very, very difficult.”
Even though demand is still far below that of a typical spring, it rebounded in the last two weeks of April, when the stores’ daily sales figures returned to double digits.
“We can tell there’s a pickup in business,” he said. “We’ll see what happens as we carry through May.”
Leads at Maroone’s stores in late April were the strongest they’ve been all year, even with an online-only sales process.
“The demand is back,” Maroone said. “I think this is going to be a good sales period, so long as we can get the product.”
New-vehicle sales at Vara Chevrolet in April were down by fewer than 20. Vara expects his supply of the crew cab Silverado Custom trim his customers want will last about a month. Once he’s out of them, his team will try to convert customers to the LT trim instead, which could be a tougher sell at a higher price point.
“What are consumers going to do? We don’t know,” Vara said. “Are they going to switch to another vehicle? Will consumer demand drop? Will consumers want to wait?
“I don’t want to wait to sell a vehicle because that’s less income to the dealership. It’s good money for our sales consultants. But if inventory dries up, they don’t have anything to sell.”
Vince Bond Jr. contributed to this report.
* You will receive the latest news and updates on your favorite celebrities!
Proper Hand Washing Glitter Experiment for Kids!
UPDATE: You spoke and we listened! After learning of the negative environmental effects of traditional glitter we have updated the…
Fear Of Spiders, Snakes, Heights And Strangers Come From Parents, Not From Evolution
Where infants and pre-schoolers show fear of spiders, snakes and heights, it is usually related to the occurrence of the same…