Is it time to trade in your car for some new wheels so you can see the USA in your new Chevrolet? Or how about that 460-horsepower 5.0 GT Mustang that you’ve been desiring? Ah, the F-150 would be the perfect truck for those big tasks. Or, the dependable Hyundai with the 100,000 mile warranty that might outlast you?
If you are in the market for a new car, you may be in for more than sticker shock, for the pickings may be slim and what you see on car lots today is what you get. Or you can order your dream car with all the bells and whistles and perhaps wait a year for delivery. Some of the pre-ordered 2020 models are just now being delivered. Until a pre-ordered car reaches the dealership, the sale is not finalized.
It’s also been quite the ride for local dealers.
Tim Hohl, one of the owners of Michael Hohl Automotive who has been in the industry since 2006, states, “This past year, we have been more out of cars than I’ve ever seen in a lifetime, yet we have sold more cars than I have ever seen in a lifetime.”
Today, the new car buying experience is quite different for buyer and seller than it was even in 2020 at the height of the pandemic. Carson City new car dealers – showcasing 14 models – are experiencing a major shift in car sales with used cars now selling like hotcakes.
If you have a good used car, this might be the time to unload it, for never have used cars sold for such premium prices. Instead of advertising trade-ins are welcome, dealers now advertise they will buy your used vehicle hoping to keep their doors open until new autos come rolling in. Hohl cites, “We use Kelly Blue Book, the industry standard for pricing used cars, that shows used cars are now worth more than when new, and what was once a depreciating asset has owners making dollars instead of losing dollars in this current buying frenzy.”
If used cars are selling at a premium, so are new cars. There’s not much negotiating although Hohl states that his dealerships are fair in their pricing since they are a local dealer and want to maintain their reputation as a hometown dealership that cares for their community. He proudly states, “The Hohl family has deep roots in this city. My brother Matthew and I were born and grew up in Carson City and graduated from Carson High.” Tim graduated in 2004 and Matthew in 2000.
Like just about everything else associated with the pandemic, it’s been one complicated reason after another for the new car shortage. First it was the sudden plant closures forced by the economic shutdown. That was followed by sluggish sales due to lack of demand since workers were confined to working from home. To regenerate demand, low financing options were introduced, working so well dealers sold most of their cars. Shuttered plants retooled to manufacture medical protective equipment including ventilators instead of making cars. When the lines again geared up to produce cars, there was a lack of car parts and more of a focus on SUVs and trucks. Today, it’s the microchip shortage keeping plants from full production.
Almost everything in today’s homes contain microchips – integrated circuits – that are not interchangeable. The increased demand for computers and other personal equipment needed for employees to work from home added to the shortage. Worldwide chip production just can’t keep up with the demand.
Today’s cars may contain more than 3,000 chips to power all the electronics. While that may sound like a lot, overall automotive chips account for only 3% of sales for the Taiwan Semiconductor Manufacturing Company, the producer of 70% of automotive chips worldwide. Currently, it takes about 26 or more weeks for needed chips to be delivered.
Yet, there may be relief of the current chip shortage ahead. You’ve seen the sticker on computers, “powered by Intel.” In April, Intel announced they may enter the auto chip market within six to nine months. According to experts, while some new cars are rolling in to the dealerships, the overall shortage may not end until mid-2022.
John Napoleon opened his Carson City Hyundai dealership in 2018. He states his sales have been “consistent with last year” with used cars selling well and the service department busy. He added, “The Hyundai Alabama plant also closed and is now only operating at a 70% capacity causing some delivery delays, but not as much as other vehicle manufacturers.” As a veteran of auto sales, he remains optimistic the industry will rebound although it may take some time for automakers to catch up with the demand. According to Hohl, there was a high demand for new cars that could not be met even before the pandemic.
If you have been traveling along South Carson City where most of the new car dealers have showrooms and lots, you will have noticed the lack of cars on the once full lots. Capital Ford is almost devoid of cars. Ford was most impacted by the chip shortage. The Toyota dealership now has used cars featured in the front row once showcasing the latest new cars. The Nissan dealer has a large banner in their front lot reading, “We buy used cars.”
The most important component of Carson’s retail market is the automotive dealers for they generate about one-quarter of the sales tax deposited to the city’s general fund. And, it’s not just locals buying cars. As a regional shopping hub, Napoleon states about 60% of his sales come from outside Carson City with the remaining 40% from Carsonites.
With a lower overall sales tax, friendlier service, and a home-town feel, Carson’s auto dealers are well poised to continue serving regional and area residents and businesses and to weather yet another challenge forced upon retailers as they struggle to return back to pre-pandemic levels. Fortunately, service departments continue to bring in much needed revenue to pay overhead.
Until new cars once again fill car lots, take care of that suddenly appreciating asset and keep it finely tuned.
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