Long lead times still causing big problems for car dealers

Lead times on many new cars are not getting any shorter and are proving to be very frustrating for many franchised car dealers and their customers. As a result managing buyer expectations is taking on a whole new meaning.

In the past a factory order of any sort, even where there may have been several options ordered, was rarely more than 3 months in most cases. Today with some car makers that has stretched to 6 or even 9 moths and incredibly in some cases even longer.

The reasons for this have been well documented but in a year where every sale is likely to count peoples patience is being tested to the limit. We spoke to one of our contacts in BMW and he said that for many models, especially the X3, they have filled their allocation and will be unable to satisfy a new order this year!

Not only does this negatively affect the business but staff morale is equally adversely affected as they don’t have the confidence to present to customers knowing they will not get a car in a reasonable time frame.

The popularity of some cars has also had an effect. For many car buyers this means they can virtually forget about getting a hefty discount as there is no incentive for dealers to do this if there is such limited opportunity to do so.

We have even heard of tales where sales people are haggling about including mats and a tank of fuel in the deal. Managing the expectation of the customer is probably the biggest challenge as, like most of us, once we have made up our mind and committed to buy something we really would like to have it and be enjoying it straight away. Therefore a lack of effective communication from the sales exec is likely to add to the frustration. It is tempting for the sales exec to give a bit of hope where perhaps brutal honesty maybe the best policy.

The other side of the situation is the valuation of the customer’s existing car. In the trade we are used to giving our professional opinion on cars 3 months in advance with the valuation tools we have at our disposal. There are also some models where it is possible to value much further down the line but getting the price wrong or being faced with a rapidly changing market could all but wipe out the profit made on the new car if the trade-in is not worth what it has been valued at.

Many dealers are pricing cars for today and basing the depreciation on the trade guides but as the guides cannot even agree on the value of many models anyway it is a potential minefield for all concerned. If customers are not sure what their financial commitment will ultimately be it is not a situation that will give them confidence if their car is worth thousands less when they come to collect the new car.

Hopefully the situation will ease in time but in the meantime if buyers are not prepared to wait car makers who can produce the goods quicker are likely to be the winners of the waiting game.

It will certainly be interesting to see who the movers and shakers are in our Car Makers Premier League over the coming months.

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3 Responses to Long lead times still causing big problems for car dealers

  1. Ling Valentine March 21, 2011 at 2:18 pm #

    When you say “We have even heard of tales where sales people are haggling about including mats and a tank of fuel in the deal” in my view this is nonsense and rubbish.

    There is no model of car (within normal car types) that I cannot get discount on. If I can get discount for ordering it, then there is discount available.

    What you are doing is giving people the impression they can’t haggle on some new cars and that is so untrue. People who don’t manage a discount are a bit daft IMHO.

    Some franchises (eg VW) are willing to provide hire cars after a certain wait period, and customers should be very wary about paying big deposits, as if the franchise dealer goes bust in the meantime then their money will be down the drain. I almost never ask a customer to pay a deposit, for this reason.

    Many franchises will be in trouble as this situation affects their cashflow and the overheads just never stop. A franchise costs a fortune to run.

  2. rex_imperator March 21, 2011 at 11:27 pm #

    Like many others, I am getting fed up with the wait. ordered a VW in October 2010, promised for end of November. Now almost end of March and hope to have it by May 2011. Maybe. Picking up the loan car this week.

  3. tom bennett March 22, 2011 at 7:12 pm #

    Of course you can get a discount if you are prerpred to ring every dealer in the world! But there are certain models where dealers are only given a small allocation and it’s right those dealers will not discount for a high demand low supply model, why would they? You dont go in any other retail business and haggle. They are there to make money, why is so much emphasis always put on discount? How is a dealer going to provide a good service to his customers if his margin is cut to the bone? The emphasis should be more on a fair deal and getting the best car for your money from the best dealer.

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