Before the pandemic, Willis Chevrolet Buick in Smyrna typically had about 80 new vehicles on the lot.
In 2021, the number dipped to between 40 and 50 most months.
“Today, we have five,” said Isaac Willis, the executive manager and third generation of his family to run the business.
More than two years since the pandemic started, “it’s getting worse instead of better,” Willis said.
He was speaking on July 6 when Delaware U.S. Rep. Lisa Blunt Rochester toured the business to get first-hand information about supply chain problems car dealers are experiencing and to tell them about potential solutions in a new House bill.
“This affects everybody,” said Blunt Rochester, mentioning shortages of a variety of products including masks and hospital equipment at the start of the pandemic, lumber, and more recently baby formula, along with lack of microchips plaguing the automobile industry.
Blunt Rochester said the House has passed the America COMPETES Act in an effort to help improve supply chains, and the Senate passed a similar bill, the U.S. Innovation and Competition Act. Now she’s working on a bipartisan committee negotiating with the Senate to resolve differences between the two bills.
The main proposals of the House bill are:
- creating a nationwide, central point of contact in the Department of Commerce to track supply chains
- mapping where problems are in supply chains so attention can be focused on solving them
- sharing information with businesses about practices to prevent supply chain disruptions
- encouraging more manufacturing in the U.S. with financial incentives.
“We shouldn’t have to rely on other countries,” said Blunt Rochester. “We need to invest in America. If we can make it here, we should make it here.”
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She said supply chain issues cause delays, lead to inflation and jeopardize jobs.
“If you don’t have the microchips that go in cars, that increases the time it takes to find a car to buy, increases the cost and affects the workers if there aren’t as many cars to sell,” she said.
Supply chain problems have led to fewer jobs at the Willis Chevrolet Buick dealership. Before the pandemic, the business employed about 58 full-time and 20 part-time workers. Now, it has 48 full-time and 16 part-time.
General Motors, the company that owns Chevrolet and Buick, reported that about 95,000 vehicles are nearly complete but are awaiting components like microchips before they can be sent to dealers which is expected to happen in the second half of the year.
While there’s not a lot to choose from on most dealers’ lots, if you order a car, the typical wait time is six months to over a year, depending on the model, Willis said.
Since new cars are in short supply, people need to keep their older cars running, and that’s fueled the dealership’s repair and maintenance business. After dipping in the spring and summer of 2020 because of coronavirus restrictions and precautions, business has bounced back to pre-pandemic levels.
“We’ve had people put a $5,000 motor into a car that’s only worth $2,500. It doesn’t make sense financially but you have to have a car, so what else can you do?” Willis said.
However, even the repair business has been restrained by supply shortages.
“We have no problem fixing cars. We just need the parts,” said Willis. “We’ve had five motors on order with GM since January. One is for a town’s police car, so that police department is down a patrol car while we’re waiting on that motor.”
Usually, the business has about $225,000 worth of car parts in inventory, but now it only has about $150,000.
Demand and prices remain high
According to a July 5 report by the National Automobile Dealers Association, while inflation and high gas prices are concerns, demand for new vehicles remains strong.
“A bigger impediment to increasing auto sales at present still appears to be industry-wide shortages of cars and trucks, which have led to analysts cutting their full-year sales forecasts,” the NADA report said.
CNBC reported that overall sales for the industry in the second quarter were forecast to be down 19% to 21% from 2021.
“Automakers have been scrambling to rebuild dealer inventories that have been hit hard by production cuts amid a global shortage of semiconductor chips and other key automotive components,” the CNBC report said.
But Ford bucked that prediction.
Ford sales rose 1.8% in the second quarter, with 483,688 new vehicles sold from April to June.
General Motors sold 582,401 vehicles in the quarter, a 15% decrease from 2021.
Toyota reported 531,105 sales in the second quarter, down 22% compared to last year.
Patrick Manzi, chief economist for the National Automobile Dealers Association, said demand is still outpacing supply, and a lack of inventory continues to be the biggest factor limiting sales.
Car prices are expected to set a record, he said.
June’s average transaction price, according to J.D. Power, will likely total $45,844, an increase of 14.5% from the previous June.
“The shortage of microchips continues to limit vehicle production, but it’s not the only hurdle,” Manzi said.
The threat of rising interest rates looms over the industry.
“The low-interest rate environment of the past few years will shift from a tailwind to a headwind as the Federal Reserve continues to boost interest rates in an effort to reign in inflation,” Manzi said. “This means that average interest rates for new- and used-vehicle finance contracts should be back at or above their pre-pandemic levels before the end of the summer.”
Tips for car shopping during a shortage
If you’re set on a new car, rather than rolling the dice with a potential clunker, here are some tips to help you succeed.
Can’t get that SUV or pickup? Think car.
Over the past decade, buyers have switched their allegiance from traditional cars to SUVs and pickups. It’s been a boon to automakers since trucks typically command higher profit margins. They can be less complex and costly to manufacture than cars yet still command high prices.
Buyers looking at a popular mid-size SUV are unlikely to get a deal, said Brian Moody, executive editor of Autotrader/KBB. Instead, he advises considering a mid-size sedan “if you can make that work.
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Shop the lot
Rather than trying to order a new car and waiting weeks or months for it to arrive, try to buy what’s on a dealers’ lot, Moody said. To the extent you can, be willing to accept colors or options that wouldn’t normally be your first choice.
Line up financing in advance
With the Federal Reserve raising interest rates to combat inflation, car financing rates are climbing as well.
The average rate for a 48-month loan has been running at 4.62% for a new car and 5.18% on a used vehicle, Bankrate reports. Both rates are up more than a half-percentage point since January.
One way to cut monthly car payments is to lengthen the term. In the first quarter, the average new car loan ran 69.5 months, Experian says.
But perhaps a smarter way, according to Mark Hamrick, senior economic analyst for Bankrate, is to prequalify for a lower-interest loan before going to the dealer to buy a new car in order to lock in the best rate.
Look at the total cost
Ignore sticker prices for a moment. Car buyers with a laser focus on the price of a new car may be missing the big picture, Hamrick warns.
There’s a lot more that figures into the cost of owning a car than just the purchase price. A gas guzzler that’s expensive to insure and prone to breakdowns or frequent and expensive repairs will drain a bank account faster than just a hefty monthly payments.
Cool your heels
There’s another, obvious alternative as well: Wait.
With the pandemic receding, auto plants are cranking up to higher capacity and the semiconductor shortage, which has crimped output, could ease.Then there is the distinct possibility of a recession.
“Given the economic uncertainty, unless someone is really under pressure to buy a vehicle, it would behoove them to wait,” Hamrick said.
Chris Woodyard from USA TODAY contributed to this story.
Reach reporter Ben Mace at rmace@gannett.com.
