How Car Dealers Handle Current Inventory Shortages

Feb 3, 2022


If you’re in the business of buying and selling vehicles, you’ve no doubt felt the squeeze of the auto inventory shortage. New vehicles simply aren’t available due to a chip shortage, and this has driven demand for used automobiles through the roof. Of course, this means they’re in short supply as well. So, what are car dealers doing to survive the current shortage?  

Unfortunately, not all of them are surviving. Many smaller dealerships have gone out of business due to the shortage. Most car lots have managed to get by, but very few are thriving without taking proactive measures. Luckily, there are many of these measures available. If you use a few simple strategies, the vehicle inventory shortage may become a non-factor for your dealership. 

Increased focus on fixed operations 

Not every approach for dealing with vehicle shortages will involve increased inventory. The primary goal is to keep revenue high, and selling vehicles isn’t the only way to accomplish this. Research found that fixed-operations departments accounted for nearly half of dealership revenue in 2017. This number has likely increased due to the current vehicle inventory shortage.  

There are a variety of ways to leverage fixed ops at a dealership. One of the primary ways is to redirect some of your marketing investment toward fixed ops campaigns. While this would typically decrease inventory visibility, the shortage makes this less of a factor. With many dealer lots sitting empty, those who want to buy a vehicle are going to find you regardless.  

Also consider advertising special offers on parts, service, and maintenance visits. This will help increase sales even during a vehicle inventory shortage. This equates to improved dealer margins and the ability to turn a profit even when you don’t have many automobiles to sell. Laying this strategic groundwork now will continue to offer benefits even when the shortage is over.  

While the shortage persists, though, you should also use your service department for inventory acquisition. Once a customer’s service appointment is complete, offering them an Instant Cash Offer is a great way to get a quality vehicle on the lot. If nothing else, service representatives can subtly communicate that you’re ready to buy whenever they’re ready to sell.  

Read our full guide on why you should Invest in Service and Repair to safeguard your dealership.  

Continued communication with clients 

Every dealer knows that client communication doesn’t stop after the sale. Once someone buys a new or used car, messaging continues via email, phone, SMS, and other methods. This could be something as simple as an oil change reminder, or it may be time to offer an existing customer an upgrade along with a great deal on their trade-in.  

Of course, the latter of these communications can be difficult during a vehicle inventory shortage. After all, what can you offer clients if you don’t have vehicles on the lot? Even so, this is no excuse to cease communications. Your customers need to know that they’re still on your mind. If you drop the ball during this time, it will be hard to pick it up when the shortage is over.  

In some instances, these communications will be nothing more than service reminders or a quick “thank you.” You can also send inventory, pre-order, and vehicle delivery status updates to clients who have expressed interest. Messaging and communication are vital for customer loyalty in every industry, and this doesn’t stop simply because there’s a vehicle inventory shortage.  

Utilize vehicle inventory acquisition technology 

The strategies discussed thus far have not focused on inventory acquisition. Still, this should be a top priority as long as the shortage persists. There are a variety of ways to do this — ranging from creating “We Buy Cars” programs to contacting private sellers.  For every acquisition approach integrating inventory acquisition technology can prove invaluable.  

By utilizing acquisition software platforms, you can automate many of your dealership’s most important processes. This is essential during a vehicle inventory shortage, and if done correctly, you may barely notice the shortage. This is essential to attract the 48 percent of consumers who decided to postpone their vehicle purchases due to the inventory shortage.  

What makes the difference is having a selection that’s more diverse than what’s offered at other dealers. This is even more important since 25 percent of people planning to buy a vehicle say they might switch brands to do so. By utilizing inventory acquisition software, you’ll simplify what could be the most essential process in the current market.  

While this shortage has led to significant changes, the fundamentals remain the same. You need customer loyalty and an impressive selection. Kelley Blue Book can help you in this process. Review our Inventory Acquisition Resources today to see how improved technology can improve your bottom line by reaching clients who are ready to sell or trade-in.  

Leave aggressive negotiations at the door  

When car sales were high, it was easy to aggressively negotiate the price of sales or trade-ins. There were plenty of cars to go around, and taking a trade-in was often just a tactic to close a sale. Thanks to the vehicle inventory shortage, though, bringing in additional inventory is an absolute necessity. This means dealers need to be more amenable in their negotiations.  

This doesn’t mean you should bend to a customer’s every demand. A shortage in inventory is no excuse to make a bad deal. Simply convey to your sales team that it’s okay to be flexible in negotiations. You don’t want prospects to go to the competition. If they can get what they want elsewhere, you should ask yourself why they can’t get it with you.  

Don’t let the auto inventory shortage cause lasting damage 

Even the most pessimistic of analysts know that the shortage of sellable vehicles will not last. Unfortunately, the damage caused by this shortage could last over the long term. Dealerships that do not properly respond to these issues may be able to scrape by, but it could prove difficult to fully recover even when things go back to normal.  

Visit our Industry Solutions page today to learn more about how Kelley Blue Book can help your dealership thrive.