For both buyers and businesspeople, car dealerships may be both difficult and enjoyable. Purchasing a vehicle can be time-consuming, especially if your understanding of automobiles is inadequate, leading to a poor purchase decision. Selecting which car dealership is best for you, determining which vehicle you like, and locating the finest post-purchase package are all factors that could lengthen the auto-buying process.
Ford is not happy with the dealers
Dealerships are cashing in on popular vehicles with hefty markups and maximizing the supply and demand cycle. At Ford, CEO Jim Farley has made it obvious that he is keeping an eye on shops who go above and beyond what is “acceptable” and will not hesitate to punish them with decreased car allocations. While dealerships scramble for top dollar and strive to grab everything they can, headquarters made it clear that clients paying “extra deposits or payments” to dealers was not acceptable.
How is the price calculated at a dealership?
- Formula: Dealer cost: Base Invoice + Options + Destination – Holdback = Total Dealer Cost.
- Total Dealer Cost (above) + Taxes / Licensing Fees – Rebate / Incentive = True Cost
Base Vehicle MSRP: The MSRP of the vehicle before any options, packages, or additional manufacturer items are added.
Base Invoice Price: The invoice price received by the dealer from the manufacturer before any options, packages, or additional manufacturer products are added.
Total MSRP: The total MSRP of all options is the sum of the MSRPs of all the car options.
Total Invoice for All Options: The total invoice price for all options.
Destination Fee: The expense of having the car shipped from the manufacturer to the dealer. (It’s also known as freight.)
Holdback: Amount given back to a dealer by a manufacturer that is not disclosed. It is expressed as a percentage of the MSRP or invoice price.
Car sales going online
In the 1990s, the rise of the internet and online buying seemed to foreshadow the demise of the ubiquitous car dealership.
Consumers continued to flock to dealerships, which mainly continued despite the critics and the bleak predictions of industry experts. Then came the COVID-19 pandemic, which forced dealerships to close, salespeople to return home, and customers to shop for cars online.
The CEO of Lithia Motors & Driveway, a publicly-traded dealership group with 215 sites and 15,000 workers, said he has witnessed an increase in web traffic across all of his shops, with active and knowledgeable buyers eager to buy.
Polestar is doing away with the typical car-buying experience you’d find at a dealership. Instead, they’re focusing on a digital-first retail approach, with retail Spaces popping up all across the United States and Canada to promote their digital platform.
Volvo, which owns half of Polestar, could be the next carmaker to change its sales approach. For example, Volvo’s new electric C40 Recharge compact SUV will only be offered online. Volvo Car USA’s president and CEO, Anders Gustafsson, stated that by 2025, half of all car purchases would be conducted online., Anders Gustafsson, stated that by 2025, half of all car purchases would be conducted online.
In 2020, Lincoln worked with its dealer partners to accelerate its Effortless Sales Experience launch, which features a completely remote sales platform and a virtual walk-around tool to serve consumers during the epidemic better.
Carvana and Vroom, two online auto merchants, have seen significant increases in sales over the last year. Carvana expects to sell 244,111 vehicles in 2020, up 37% from 2019 and will invest $500 million in new facilities and hire thousands of additional staff.
The industry may consolidate due to the online drive, among other changes. Product specialists or consultants will most likely replace salespeople. Dealerships will have to operate with fewer employees and rely more heavily on digital traffic networks.