Car Inventory CRISIS: Dealership Manager Explains

let me ask you this who can pay a vehicle off in 36 months all right nobody right now like as inflation goes up service goes up that goes hand in hand with buying cars as cars go up service goes out you talked to me a lot about negative equity and you're seeing that as a big time problem absolutely correct and if you remember last time I told you we don't we don't charge anything extra on our cars all right so JJ you are a GM here at a Nissan dealership so tell me what you're seeing as far as customers coming in what's your what's your temperature on the market right now uh well the temperature on the market is basically dealerships have a ton of inventory um you know just a few months ago I probably had 40 cars in stock 40 new cars now I'm sitting at 17 with another 70 coming this month wow so um with the next couple of months if I didn't sell another new car I'd have 233 new cars in stock oh my goodness yeah so what what are you guys going want to do about it do you do you just reduce prices and hope these customers come are you telling the factory hey um we need to not have so many here what what's what's what's the plan well the plan is uh as Nan send continues to send out inventory we do have the choice to either accept or deny inventory so you start to see a lot of other dealers start to turn down inventory because we've got too much and this is the allocation process absolutely correct so uh like today there's a PO that opens up that's you know tells how manyy we earn then we get to decide on if we want those cars or we don't and that's your turn and earn kind of absolutely correct okay so what vehicles right now do you feel like you can move very well and what what maybe more price point that is is a little bit more difficult for you oh that's crazy cuz I remember last time a few months you were here you you were looking for um Centras or cheap stuff under $20,000 right Versa Versa Versa and I didn't have I had one one or two right now I'm sitting on probably 23 wow wow wow so so then back then when I came that was about I mean it's only been like a month and a half two months ago and I talked to a couple salesman here and they were like if they give us versus we could sell them just as as quick as we can get them but it's not the case even on the cheaper stuff now even on the cheaper stuff uh just because people are what what do we consider cheap right I remember when versus used to be versus in centr used to be 12 to $15,000 right now my cheapest vers is $20,000 and my cers go up to almost $30,000 wow well now we're seeing that the the average new car is $50,000 so AV Versa compared to this Market at $21,000 that's cheap it is yeah but you're still having a hard time moving those it it is you know we need something from Nissan to help us out uh there's no there's no additional incentives or anything on it they just assume that just because you got them you can sell them but people still want something from your manufacturer to help them out right so but a year and a half ago that wasn't the case if you got it you were going to sell it if you had it you were going to sell it it it it didn't matter just because supply and demand right now that you got it Nissan says you got it now what are you going to do with it now do you feel like so so let's let's go back so the we're seeing that incentives are raising from a lot of other manufacturers sounds like you're not seeing enough from Nissan yet though but have you seen some increase of incentive spend have you seen special interest rates are you getting any Heth I am seeing special interest rates you know when when your average uh right now is 8% 8 to 9% um Nissan's got a few subvented rates out there for um 0% for 30 but let me ask you this who can pay a vehicle off in 36 months all right nobody right now right so it sounds good but your average consumer can't pay a vehicle off when vehicles are 3040 and $50,000 they can pay it off in 36 months so it's just it's just a struggle for any consumer as walking the doors now I know I know that last time I came and talked to you you uh you to me a lot about negative equity and you're seeing that as a big time problem absolutely correct I'm starting to see more of that now because of other dealers that may have charged their their their customer base over and above the cost of the car right um and if you remember last time I told you we don't we don't charge anything extra on our cars you know we just we want to earn a customer we don't want to just take them out of the market forever but now what's going to happen is those customers that are ready to get out of those cars that bought those cars at the height of 2021 2022 are ready to get out right they just can't and there's not enough markup in new cars today to help them get out and there's not any incentives extra rebates which Nissan is known for to help these customers get out so what what happens now when you have one of these consumers that comes in and I I know the average underwater that a consumer is own their car right now is somewhere around $6,000 so you get somebody that comes in there's $6,000 $10,000 underwater on their vehicle are there any levers that you guys can pull or are you having to get to the point where you have to turn customers away believe it or not some banks are increasing that are increasing the amount that they'll loan on a car okay so opposed to it being 115% or 120% then maybe they're doing 135 140% because they know that they've got to do something to capture that business so they're doing their part I guess to giving them a little bit more advanced to get them get them out but you still need money right and then that's just kicking the cam down the road when they go to their next deal 3 years from now when they want to upgrade again now instead of $6,000 underwater now they're $122,000 underwater well see the thing used to be in order to get out of all negative equity you used to could leas your way out of it right you can't do that anymore right because customers that have came in that have leased cars two years ago had let's just say they had Cent for instance they could lease a sent you for $190 a month now to get the same car it cost cost you almost $400 a month to lease a car so I know that last time we talked to um we talked about a little bit of what you guys were making on these cars because you're not doing a lot of these high margin products you're not charging nitrogen out there you're not charging Market adjustments I'm not seeing that on your your cars in fact all of your cars are MSRP and when I go to your website it's under MSRP which is great but I know that there's there's no margin in that so where are your big profit centers right now are you is it more in your in your repair Bays is that is that where you're you're making your money right now well that's that's reality is service is where always where you're going to you're going to make it up just because people going to continue to service a vehicle people are keeping Vehicles longer because they can't afford to get out of the cars that they're in right now so they're they're hoping that later on down the road if they just keep servicing them then eventually they'll be able to get out and with as inflation goes up service goes up right so that goes hand in hand with buying cars as cars go up service goes up so that's where we'll make our money up is just because we customers we want to take care of customers in their car so they're going to pay a little bit more for service so what's what's got to change we're talking about this Market getting worse the the days of inventory you're seeing it here and you guys are selling cars for under MSRP and you're still having a hard time moving cars out and you need Nissan to step up but what's what's got to change in this market is it interest rates is it manufacturers having to bring down msrps get cars cheaper to you is is it that customers the economy is just got to get better what what fixes this market right now believe it or not used cars is what's going to fix this market right now because the more used cars that I I get that I acire well they go twofold I've got I've got new cars in order to get used cars I got to sell more new cars right because to try to buy at auction is you can't can't do you just can't do it not make money no not at all and and what you're buying at the auction is some something that another dealer doesn't want there's a reason it's at the auction exactly right y so you know um what's going to fix it is Nissan is going to have to come back to their base and put incentives rebates really it's okay to say hey yeah we've got special rates that's that's great but I need rebates I need rebates from Nissan to help us move these cars cuz you got to pull monthly payments down that's what's going to sell the cars at the end of the day the customer proba doesn't really care what they're paying for the car right correct they care what they're going to pay on a monthly basis what what's my payment right right you know it used to always be what's my payment I want a $250 payment that $250 payment just doesn't exist right now right so what what's the lowest payment that you can get a customer into right now say they have average average credit right now what's what's the lowest you feel like you can get a a a customer into well you figure if a customer puts no money down and if your average car is 20 grand if we're talking talking new cars right if your average car is 20 grand that's 4 to 450 payment yeah and people just that they can't do it because typically the people who are having to stretch to get that amount and they're going to the cheaper of the cars that are on this dealership they're probably already stretched to begin with and that payment that's $450 three years ago four years ago that was a 229 a month payment so payments almost doubled just in the last 3 four years yeah um it's it's crazy to you know I would say Nissan is probably one of the few dealerships that the MSRP hasn't increased that much opposed to you know other manufacturers but uh you know even for us as our cars continue to go up people's pay don't go up right so it still makes it tough for them to get into newer cars so I know that you've told me that you talked to a bunch of other GMS of other franchises other brands are there any brands that stick out to you right now that are doing it wrong and they it's it's it's going to be a big struggle for them going forward I have one in my head but I'm I'm curious to know if you have any other franchise managers that you talk to and they're like oh I don't know what we're going to do um I got a couple of buddies that are with uh you know you know um Dodge and a couple with with four that that you know and they were telling me that you know their stuff their msrps are like doubling and that's just crazy because like I say those things go up people's money don't go up and they're going up from here we I mean we just hear Ford's msrps are raising it's great that Nissan over the years has kept their MSRP somewhat static whereas you're seeing these these other manufacturers they have to see they have to see these dealers turning down the allocations now yeah and then they're going to raise their msrps and I know they're padding shareholders Pockets right now the manufacturers they're making tons of money but the manufacturer and the dealer completely different the manufacturer might as well be a wholesaler they don't they make money when they sell a car to you correct they don't make money when they sell a car to a to a consumer that's when you make the money absolutely so that's why and I explain this a lot on on my channel is why okay they can put together good earnings these manufacturers can still make good money as long as these dealers are taking in cars when it changes is when a dealership like you say Nissan I've got too many of these I got too many I can't take anymore absolutely correct so you know right now haven't seen that yet we're starting to see it now though absolutely you know uh you know I'm kind of at the point where I've got to back off a little bit just because you know it it's not just you know getting the car in but it's paying the interest and floor plan on these cars that are coming in if they sit then that's costing the dealership and you know that's costing owners and that's costing you know so I have a question for you that I get a whole lot so a lot of of my viewers will say okay well these dealerships that have these floor plans they have all these cars out there and they have inventory that's stacking up why don't they just go in and this is a question for you to go in and cut all your prices by $10,000 and move them on instead of knowing that okay this car is probably going to sit for another month um and you know you're going to have to just continuously play pay this four plan and just kick the can down the road why not decrease the prices up front to go ahead and move them so you don't have to pay that four plan later a lot of dealerships that can do that is because of what they charge and their Market adjustment they can go ahead and say hey won't we just go ahead and show a $10,000 let me show a $5,000 uh discount on a car because yeah May sure a $5,000 discount on the car but I can show you countless and countless of addendums that we take off other man other dealers cars that say Hey you know $3,000 for air which is nitrogen you know let me let me for willocks let me give you let me give you $200 for willocks that I can show you hey I'm going give you $5,000 off the car to help it move the markup in in new cars isn't what it used to be right so what we have to do is we have to be smarter with uh you know how we're selling our cars to customers we try not to uh put any addendums or anything and and like we said we've got our vehicles listed at below what suggested retail is and then what we also started doing is giving our cars our customers uh limited lifetime warranty just because we want to make sure that we keep that customer coming back to us and coming back back to our service department because that's where we're going to make money it's just taking care of the customer down the road I can't make it on the car right now right but I can make it taking care of a customer and service yeah so if you're not going to make the money on the car right now you want to make it on the next car that they buy hopefully when they Choose You Again by incentivizing them to choose this place as the place that they buy absolutely correct so going back to the four plans I can give this example of what a lot of probably GMS are facing this right now are talking about okay why don't we just lower the prices right now versus verus um just kick the can down the road pay that Flor plan next month because you would have to go out there and basically decide okay I I'm going to have to mark down all my cars by $10,000 right now or I can just pay this $500 floor plan next month and hopefully that that Customer because they don't look at a big picture like that all they looking at is you know let me look at the profit that I can make on it right now yeah but you know unless you're a GM or you're an owner um where you that you got to worry about floor plan you know as a manager as a used car manager all you know is you're selling the next car it could sit it it could sit for as long as you you know it's out there but an owner or somebody that's focused on taking care of their store taking care of their company taking care of their their employees you got to look at those things how long do I have to sit on this before it starts eating into you know the profit right so you know we try we we we do an okay job of turning our inventory you know Nissan said okay I'm going to give you a little bit of I'm going to give you some extra inventory but in order to do that you got to sell it in XYZ a right or you start playing floor plan on it so what what happens in the case where okay it feels like Nissan is awarding you this inventory right but now it's it's no no secret it's a little bit slower to sell inventory right now and now Nissan sees that okay you you are slower at selling this inventory but now there's a lot of dealers that are slower at sence inventory so instead of a what seems like an award of this inventory they're like okay now you got to take it because this inventory's got to go somewhere so it seems like a a double-edged it is a two-edged sword cuz at the time when you didn't have inventory and they were offering this up to select dealers we were like yeah let me go ahead and take that so while other dealerships don't have it let me ramp up um the inventory that we got and then once we started receiving it just kept coming it kept coming and then business kind of slowed up you know and slowed up and now I'm sitting out here with a sea of inventory that uh is for sale yeah it's for sale yeah it's for sale that I've got that I've got to figure out how to sell it yeah and do you have do you have certain deadlines whether you're they're put on You by Nissan or they're put they're self- mandated deadlines like okay I need to sell x amount by by this timeline or I need to not have cars on my lot longer than this before you start maybe finding Outlets I don't know whether you send them to other dealerships if you're send them to auction what what happens in the case where you have a car sitting out there longer than that time frame that you want it to be out there what what do you do in that situation I decide at that time how I'm going to Market that vehicle for one thing well I can't Market it less than what the manufacturer says I can Market a car correct right so I can't advertise a vehicle lower than what the invoice is on a car right so what do I put out there to to move that car only thing I can do is put you know clearance signs out on it that somebody hopes to drive by you go out to the corner hold up he hold his paper sign say these signs too buy one get buy buy one get one free so yeah I mean you know so you you you you can't advertise that but what we can do is you know we do we do some Facebook stuff that we may say hey I've got a blowout deal on this car give me a call on it I can't tell you it's below XYZ doll because I don't want to be not compliant but I can say hey we've got blowout deals on these vehicles that have to go so is that is that frustrating deer that needs to sell inventory right now and you can only and you know you'll sell it less than what Nissan wants you to Market it for but you know you'll take less than that and you know if you take less than that and if you market for less than that you'll sell it it's got to be so frustrating to not be able to say hey customers come to me I will sell you this car for this amount that I think all manufacturers that way they are they they are but we you know as as as a a GM I I'm definitely that that guy that's like hey hey what's going to make me different because if we all can't sell below what the invoice is on a car right you know years ago or just not even years ago a couple years ago everybody was on the volume game right you gave a car away because that's how you got your money once covid hit then it was you guys are are making hand over fist money not us as a dealer because we didn't mark our cars up but they was like they decided that they were going to take certain incentives that we were allowed to have from us because we were cuz y'all were rolling in the money right they thought you were making they thought we were making me hand over fist so we didn't need that additional income but these dealerships that were doing the right thing that weren't gouging the customers correct they're the ones that got hurt in the situation you guys got hurt over the last three years because you were doing the right thing absolutely correct and we're going to continue to do the right thing it's just um I you know I for an owner that you know really cares about this community and making sure that we do the right things for the people that are in our community so you know regardless what the market is we're going to continue to do the right thing and at the end of the day we can go home and say you know what our heads hell high and be like you know that customer that other dealerships made all that money on up front that they won't get back guess what I'll get that customer yeah and you just make customers life and I can actually vouch for this dealership because I've been to dealerships over the last year and a half looking for these Market adjustments looking for things and I remember when I was doing these videos showing a lot of these these these price gouging things it I was amazed being able to walk up onto your dealership and like there's not even a nitrogen fee there's not even there's will like there's nothing and I'd never seen that looking at that over the last year and a half right and I was amazed and that's why I came in here and started talking to y'all as soon as as soon as I I saw that but what that's one thing that differ differ you guys from a lot of other dealers what else what else makes this dealership a place that a customer wants to just continuously come back their family members when they're going to buy a Nissan why do they want to come here people it's definitely the people that we've got here I've got I've got salespeople I've got managers that have been for been here for years so you look at it this way when the market changed and all these dealership were making a ton of money they employed a ton of people mhm and then when the market changed all those people that they employed they didn't need anymore so what happens is you can't build a relationship with a customer when you don't have the same people every day that they see when they come in do you do you do you feel like customers are wanting to come to this dealership because of the dealership or they want to come to this dealership because of the sales person they dealt with they want to come because of the people that are here okay definitely the people that here I've got sales people been here for 26 years 17 years 18 years uh my my shortest tender salesperson has been in for almost a year uh I got managers and and finance people that have been here for um 20 plus years and that's unheard of sales people in this in this environment this industry they don't they don't last that's a high turnover position high stress position too absolutely but not at this not at this store okay you know so you know I still I still tell a customer treat a customer whether they can buy they can't buy whether they're tanked in the car whether they're not tanked in the car you still treat them like a million bucks because guess what eventually they'll come back they'll come back and buy so I want to talk to you about lending what are you seeing from Banks outside lending institutions that that customers are trying to get loans what I've seen is that stuff's tightening up are you seeing they have de uh banks are definitely tightening up because of and I'm going to have to go back to some of your videos some of these repos that are are that these people have put themselves in and think about this what is the average car payment today 700 to 750 that's the average car payment some of these people can't afford them so guess what they're sending them back you're seeing them at the auction yep and and so now banks are like you know they're really con being concern they're really tightening up on how they're going to lend their money out so are you finding that that your customers are having to come up with a higher down payment on some of these cars and is that a is that a struggle for a lot of these customers that are trying to get in the door oh yeah definitely a struggle like I said cars have gone up people's pay hasn't gone up and people are trying to decide on hey do I want to do I want to put money on this car do I want to go feed my family so you know luckily we deal with a lot of banks that do help out I call them second chance banks right yeah they help out people low down payments yeah and we're unfortunately we're finding in that uh do going into the subprime lending that's why we're seeing more of the delinquencies happen so as you're seeing that are you having a lot more people that come in here and say oh I've got a I've got a repossession on my on my credit or or are you seeing more of that pop up that's that's stopping people from getting Al along because I know a lot of times if somebody's going to come in and they have a repossession they're probably not getting one of these new cars no but uh they will buy a used car they will buy AED they may not buy a new car but they will buy a used car but um I'm I will say I'm fortunate at this store just because of the area that I'm in we don't have a lot of my average loyal customer is anywhere from on average 45 up okay so it's a little more affluent customer base that you have yeah yeah I've got you know I got a lot more C true customer that can pay cash uh I have less of a customer that that makes the deal way easier right well I prefer them in finance but I'll take cash you going to make money on back don't Finance though pay cash pay cash you save money yeah but don't tell them you're going to pay cash when you come in here it's probably not going to matter anyway cuz you going to Y y'all figure it out y we always figure it out yeah we just want to take care of the customer whether they pay cash or they finance we still going to take care them the same way so what does the Ed car market then look like for you because I mean mostly you're doing is is new car deals but but you're also you're there's more money to be made in the Ed car there's definitely more money to be made in used cars in the way that I've got acquires I got to have trades in order to get trades I need to sell new cars so and you know I think I told you a little bit a little bit um earlier that you know a lot of vehicles that we would have normally sent to the auction were keeping because customers are still looking for that $110,000 or less car right and then we're finding out that we can sell those cars and I need you to stop figuring that out because I need you to send it to me so I can buy it so so here's the problem then there you're not the only dealership you're not the only franchise new car store that's figuring this out yeah all these other franchise dealers are figuring this out too and it's going to create an even tighter squeeze on the used car inventory and that's why you can see the volatility and the Ed car market like we're seeing right now and like we'll continue to see over the next couple years because you guys are going to keep the nicer stuff which you should you're going to make more money on it but also it has you to where you're not so tied to your new car inventory yeah so it feels like that's bad for the manufacturers it's bad for use car dealers but it's good for you kind of here sitting in the middle it'll make me look at a new car different than if a customer's got a trade it makes me look at a new car different does that mean you're paying more for that used car it means I may step up and pay a little bit more because it's going to I'll pay more for it if I go if I try to buy it from the auction right why not cut the fees and everything out and pay a little bit more to the customer to sell them a new car right don't make it on the new car but if I'm able to get a used car a good vehicle for a customer I'd rather get a car that way so are do you do you guys go to the auction to get used cars at all or is it is it all just tradein no we go to the auction we buy we try to buy stuff from the auction I remember last time I talked to you you had never been to the auction right absolutely correct still never been to the Au it's it's all it's all online so I'm going cast no you got to come with me one week you got to come with me one week I like to that you have to take me one time well we got to wait we got to wait till it's 95° outside I'm in and then I'm going to get you into the cheapest ugliest niss seen you out there seen you out there sweating everything but really you need to put your hands on a car I I I I get it that's why you know trade-ins and stuff that I can see I can touch I can feel I can smell I I put more money in those cars knowing that at least I can retail that car to a customer I can't do that when I'm trying to buy offline or definitely buy from the auction so all right uh pull your crystal ball out so we know we know what the market is right now we know how tough it is for franchise dealers like you to be move into inventory Where Do We Go From Here I don't think rates are going to move significantly anytime soon um I feel like manufacturers are still going to try to pump out as much as possible to you guys where what do you feel like we're getting close to a Breaking Point do you feel like we's a slow grind down what what do you feel like the Market's going to do from here both on the new car side and probably the used car side I new car side this is and this is me pulling my crystal ball out and I might have a little inside information on that I can't share though but uh msrps will start to go down okay I believe msrps will start to go down I think dealerships uh manufacturers will see that you know they price themselves out of the market so what do they have to do they'll they'll have to adjust those in order to and does that mean like new year are we going to have to wait for New Year to come out to see the msrps com down or do you feel like you're going to see from these manufacturers we've already seen it from santis that they're going to start reissuing new msrps on stuff that's already sitting on they're not going yeah on Nissan's world I don't think we're going to see new Ms I mean new stickers come out okay so I think it's the next model year coming up you'll see 20 2025 uh model years I think you'll see a big diff a huge difference on what the MSRP is going to be so what is that due to inventory that's going to be sitting on the line have to sell it we have to sell it before then they're going to have to they're going to have to break some rules then and let you Market it for less than what they are going you well they won't they won't do that but what they'll do is they'll they'll they'll incentivize they'll put bigger rebates on it that'll eventually pop up that's how and that's how you be able to advertise that car okay so it may MSR the uh invoice may be XYZ but you can you can Market a rebate on there okay so those days of seeing $5,000 off or $4,000 off with the rebate you might be able to see those pop back up that's good I'm already starting to see a couple Ford dealerships I've seen I've seen a little bit of that on the side of their cars like on the the side of the trucks the F-150s everywhere everywhere um anyway so okay so you are the GM at bmet Nissan here in Salsbury North Carolina why and I I completely endorse this dealership never seen a markup never seen add-on never seen nitrogen you know how much I hate nitrogen anyway never seen that here I completely endorse this dealership if you're in the area you want an Nissan come see them why should they come byy car uh from benm at Nissan and Salsbury you should come here because this is still a people business at the end of the day people just want to be treated like people people want to be taken care of they don't want to they don't want to uh have to pay for something that that they don't want they don't want to see these addendums on the side of the car they just want to know that when they come in they're going to be treated right they going to get a fair price and that they're going to get a lifetime limited warranty that's good all right thank you JJ apprciate you letting us here talk to you all right subscribe if you haven't like this video and I want to thank Ben Minette Nissan they have also dealership in Concord North Carolina absolutely GMC Chevy Buick CAD Cadillac is there anything else am I missing anything nope think that's it all right thank you guys have a good day boom

Channel: Car Questions Answered

Views: 252,199

Keywords: Car Questions Answered, car auctions, car market, car questions answered, carmax can't sell cars, how to negotiate, upside down in car loan options, used car prices, truck prices, new car prices, used car dealer auctions, toyota, ford, dealer auction vs public auction, dealer auto auction, dealer auction prices, stock market, ford f150, auto loan crisis, doc fee, repo, auto loan crisis 2023, car market crash, car market 2023, carmax, car prices, used car bubble

Id: e6KeS2Q0rtY

Length: 30min 13sec (1813 seconds)

Published: Fri Mar 15 2024