Shade-tree mechanics have grumbled for decades that they can’t work on any vehicle made after, say, 1990. It’s the computerization of the blasted things.
That continued reliance on technology hasn’t let up. From the middle of last year to the present, a microchip shortage related to the COVID-19 pandemic has hampered auto manufacturers’ ability to generate new vehicle profits, caused dealers to scramble for inventory and created attractive trade-in scenarios for customers.
Countries such as Japan and Taiwan have seen workers get sick on microchip assembly lines. In addition, the disease and its fallout have affected the production of rare earth elements that go into the chips, such as cerium, yttrium, iron and silicon, mined in China and other far-off locales. Any product that depends on a chip for functionality has been affected, not just automobiles.
The shortage began last year and has persisted. Dealers say they are starting to see a steadier trickle of new vehicles, but nothing to rival normal conditions.
Walk onto virtually any car lot in the area and you’ll be confronted by one of two sights — a relatively skimpy stock or a proliferation of used vehicles. The used stock is sprinkled here and there with new examples of the dealership’s official line.
Three local dealers have arrived at different formulas for handling the vehicle shortage.
At Dutch Miller Kia — which also sells Chrysler, Dodge, Jeep and Ram — general sales manager Roger Wood said his dealership has stayed afloat with a fairly steady supply of Kias and Chryslers. Wood said Kia has been able to ship more than 100 units twice in recent months, a sizeable amount, considering the circumstances.
Wood said his dealership’s pipeline is kept flowing by inside knowledge, gleaned in January, that the chip shortage could last a while. He said Dutch Miller decided it would avoid new vehicle orders that required a proliferation of chips.
If, for instance, it could dodge a chip that supplied blind-spot detection in mirrors, it ordered that vehicle without the detectors. Same for some other bells and whistles.
“If it used less chips, we just left some things off of it,” Wood said. “My truck doesn’t have blind-spot detection in the mirrors, but it’s big enough that, if I can’t see it, I shouldn’t be driving.”
Despite the ingenuity in ordering new stock, Wood said his lot has sold plenty of used vehicles. They are not always easy to come by, though, because of rental companies, such as Enterprise and Hertz, holding onto inventory longer. Normally, both would send vehicles to auction sooner, and auctions are the chief means dealers use to acquire used stock. If you’ve ever looked at a newer-model used car with high mileage, it probably served in a rental fleet. Or briefly belonged to a traveling salesperson.
“The rental companies have got to hang onto them now, to have something to rent to people,” Wood said. “That’s why you’ve seen a spike in the value of trade-ins.”
Dealers are willing to offer a decent trade amount, but they also want a higher purchase price for used vehicles. Miguel Pazos is Todd Judy Ford’s general sales manager. He estimated that used car prices have increased 15% to 30% in the Charleston area, a pretty good guess, according to the website iSeeCars.com:
“Used car prices have increased 16.8%, or $3,926, compared to the same period the previous year,” the site reported. “This is compared to a 0.2% increase in 2020 over 2019.” West Virginia rates as the third-lowest state in the survey, with an 11.8% increase. The only states with less of an increase are Vermont and New Jersey, at 10.7% and 11.1%, respectively.
“The rise in used car prices presents attractive trade-in opportunities for consumers who can get rid of a vehicle entirely or who are willing to trade one in for a less in-demand vehicle,” the site says. “For example, selling a pickup truck or trading in a large SUV for a smaller one can leave consumers with extra cash in their pockets.”
Todd Judy has jumped heavily into the used segment. An at-a-distance scan of its lot appears to show a sea of new Fords, until one inspects more closely. Its muscular, prized F-150s are scarce, replaced by used Hondas, Kias, Chevys, Jeeps and a plethora of other makes. Pazos said his dealership has snatched up every used vehicle it can find.
“We began to purchase from a lot more sources,” Pazos said. “Off the street, trade-ins. We now have a robust pre-owned inventory.”
The heavy jump into used stock has been successful, he said. “As far as total units, March was a record-breaking month. We sold 251 cars. Our previous was 180 ... . We’re still a new Ford store, just temporarily stocking up on pre-owned cars.”
Anyone who has bought a car knows that the cat-and-mouse of negotiating the sticker price down, while trying to get the trade-in value you want, can be daunting. If the dealer gives you the purchase price you want, you might not get the trade-in amount — depending on how hungry you are; how much time you’re willing to invest haggling; and how willing you are to walk away. The same principle holds true now. You’ll get more on your trade, but pay more for the purchase. You can’t always get what you want, Sir Mick Jagger sang.
Near Dutch Miller, veteran dealer Joey Holland, 66, says of the chip shortage, “I’ve never been around anything like this in my 43 years in the car business.”
Holland said the past three months have been difficult. His new inventory, normally 225 new Chevrolets, is now down to about 12. It is difficult to generate trade-ins. In response, his business has found some success in finding customers “who are patient and willing to buy cars on the come.” This means they make contact, come in to talk in person, and learn what limited new stock is on the way. In about three weeks or so, their vehicle is in.
This takes away the romance of browsing a new lot, Holland acknowledged, but he said most people these days have used the internet to narrow down their choices. Fewer people arrive at a lot now with a blank slate in their heads.
Holland said he also maintains a pipeline from a particular GM factory with which he has done business in the past to supply his every-three-week delivery. He believes used car values are coming down again, and that “used inventory is not ideal for variety and balance.”
His biggest regret of having a small used stock, he said, is an inability to offer a loaner to customers who have a car in his shop.
“We normally had 40 used cars for people to use,” he said. “Now we have six. It’s impacted our customers, and I’m sorry about that.”
In addition, a couple of salespeople have volunteered to take 60-day furloughs. But he said he will soldier on.
“We have a saying here,” he said. “We want to control what we can control and do the best job we can.”