New car stock shortages: Discounting? What should you do?
You’re in the market for a new car, and you’ve heard about all those stock shortages at new car dealership. What should you do? Can you still get a discount?
The car industry is ruing the day it screwed all those computer chip manufacturers over, because when the pandemic hit, and demand for TVs, computers and gaming consoles went through the roof, carmakers got left out in the cold.
Production lines didn’t exactly grind to a halt, but global demand for cars has eclipsed supply, and the thing stopping carmakers from making more cars is chip manufacturers struggling to supply more profitable chip-sets to the likes of Apple and Samsung.
Now that we’re all caught up on the underlying causality, right now, waiting times on some models have receded over the horizon. So, we’re in a market where demand - in general - grossly exceeds supply. And when that happens (economics 101) it places upward pressure on prices.
In other words, there’s a flood of buyers. And limited supply of new cars to satisfy them. Therefore, dealers are generally not motivated to discount. Not like they were two years ago, when car sales were in the doldrums and they couldn’t shift the stock they had.
So, if you are in the market for a new car right now, my strong advice is: Wait if you can. Because discounting will return in earnest when supply frees up - and this may be as early as six months away. It might be longer. Anyone who tells you they know exactly when is - frankly - full of it.
Obviously, if your car just got written off, you probably cannot wait. You need a car. That sucks. But for most other people, waiting is the smart commercial move. For many cars you’ll be waiting anyway, even if you sign on the dotted line now. And you’ll likely pay the full freight, or near enough.
It doesn’t seem like a smart move for most people to sign, pay a deposit and wait until - allegedly - October, or something. Why not leave your options open, remain uncommitted, and see what’s happening in October? I’d play it that way.
Some people have said to me they can’t wait because their lease is running out. To which I would retort: Dude, ring the finance company. Refinance the balloon for 12 months. Take a break on the payments (because it’ll cost you less to do that) and then reassess when supply frees up.
Dealers are, of course, still dead keen to stitch you up. Now. Because a deposit and a signature is money in the bank at a later date, with less of a discount than they would normally have to concede to get you over the line.
Plus, stitching you up now takes you out of play. You are unlikely to shop around much more, and you probably won’t therefore transact with a different brand, or at a different dealer, because the deposit is hanging over the head of your deal. If you back out, they’ll be keeping that deposit, which is, essentially, money for jam. Because they’ll just commit that car to someone else.
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Dealers don’t fight fair
It’s very dangerous to go into a dealership with the vague intention of ‘just looking around’ - because dealers are ambush predators, and you are standing on their X. That’s how ambushes work. And their job is to turn your vague interest into a commitment - with a deposit and a signature. And they are good at it.
They can proffer several dozen reasons why it’s a terrific idea - for you - to transact now. They will say: ‘Otherwise you’ll be back in three months and the queue will be even longer.’ Or something. Like: ‘Get in now, or you’ll miss the boat. And the next boat.’
These are, of course, bullshit excuses. Dealers simply do not detain themselves with considerations orbiting the planet ‘good for you’. They are exclusively obsessed with what’s best for them. They achieve this objective by framing the debate using a bunch of compelling-sounding reasons for you to act now.
Look at the clock in the showroom - it’s always the same time in these places: Bullshit o’clock. Whenever the sales dude’s lips are moving and his larynx is vibrating, he’s just telling you the time. I would not make decisions based on this.
Therefore, go in with a game plan. Know the drive-away price, undiscounted. Take - broadly - 15 per cent off. So, say the car is $35,000 - full freight, on the road, undiscounted.
With 15 per cent off, it’s about $30,000 - which is a nice, round number. Never go in as a couple, because the sales dude will play one of you off against the other. It’ll be him and your misses looking at you like you’re cheaping out by sticking to your guns. You mark my words.
They are such elite performers. It’s like stepping in the ring with Iron Mike. You’re going to end up on the canvas, but at least you won’t see him hit you.
So go in alone. You say, ‘Yeah. Love it. Car of my dreams. But my missus is gunna cut me in half if I spend one cent over $30k. So, I’ve got $30k, on the table now. Serious offer. Do you want to transact?’
He goes: “Let me give her a call.” (Because he’s trying to remove the roadblock - seeing as how you and he now want exactly the same thing, which is for you to buy that car, right?)
You say, ‘No can do, dude. She’s a nurse in the emergency department.’ Or, ‘She’s a teacher. In class all day.’ Or, ‘She’s a lawyer, in court all day.’
So now he can’t go to work on whoever is holding your limit. What shame. Checkmate. It’s bilateral bullshit o’clock now, which is much fairer. You’re no longer holding your spending limit. Someone else is, and they can’t be reached.
This, of course, doesn’t have to be a person who actually exists - just a hypothetically plausible person. And, yes, before you write an outraged comment on behalf of your moral compass: I am absolutely proposing that you lie. Intentionally. Pathologically. To the sales guy’s face. Like you mean it. It’s just advice. You don’t have to take it.
At this point, he’ll either take your offer, or leave it, and there might be some theatrics - like you care. You’re not there to find a friend. You won’t be going out for beers after, except of course, in hell...
Ultimately, if it’s a big, fat ‘negativey’ on your $30k offer, you can come up $2000 to $32k - still 10 per cent off, still a pretty good deal. Like, nuts on the line, dude: I’ll come up $2k and hope she doesn’t go for the rusty spoon. Final offer.
Pressure testing the dealer
You’re running an experiment, right? Testing the limits of that dealership’s motivation to discount on that car. You can’t just ask, because you won’t get an honest answer. You have to be a manipulative, coercive bastard - politely and pleasantly. Just like him.
And if he doesn’t go for that, at $32k, he’s really not bullshitting about having zero motivation to discount. Probably. But do not cave in. Leave your number. Walk, and tell him to feel free to call if he changes his mind. You’ll see what’s on offer elsewhere.
They hate that. The thought of your money, exiting the building, uncommitted. Worst-case scenario: Come back in 6-12 months and go through the motions again. Because when supply frees up again - as it surely will - and latent demand in the market is satisfied, the discounting floodgates will once again open.
And if I were you, I’d make it like surfing. Just paddle out, float around, and wait for the wave. There will be one, and it’ll be a sweet ride - provided you can delay your automotive gratification until it breaks.
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