Desperate Car Buyers Are Throwing Money At Dealers

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The semiconductor chip shortage has its perks, for some.

There's mostly been bad news lately on the new car front because of the semiconductor chip shortage plaguing automakers around the world. Some of the most popular vehicles, like the Ford F-150 and Chevrolet Silverado 1500, are currently suffering production slowdowns because of a lack of chips. Some analysts estimate the crisis won't end until early next year, at best. Needless to say, automakers are losing money and factory employees are finding themselves partially furloughed once again. It's not a good situation. However, dealerships are reporting record profits because buyers are getting increasingly desperate.

Reuters has reported on several cases where customers are not only paying full sticker price but are making the deal before their new vehicle is even assembled.

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One Buick-GMC dealer manager says he's "selling about 150 percent of what I have on the ground. We are selling stuff so far up in the pipeline that they're putting money down on 'in-process,' which is in the plant. Customers are coming in just saying, 'I'll take it, full sticker, get it ready.' It's nuts." Under normal circumstances, consumers search for incentives and rebates to help bring prices down but not anymore, and most dealers couldn't be happier.

For example, AutoNation, America's largest dealer chain, reported nearly triple gross profit of $2,700 per new vehicle for the first quarter. However, dealers should be worried about thinning inventories because reduced supply will bring down profits even with higher margins.

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One Ford dealer says he normally sells around 225 vehicles per month, but right now he only has 150 vehicles in stock. Only 30 more are expected to be delivered next week. Higher profit margins are great, but if there's nothing to sell then what's the point? Assembly plants will continue churning out new vehicles, but at a far slower pace. Eventually, dealers and customers could run out of patience.

The likely scenario could be consumers hitting the brakes on new vehicle purchases for the foreseeable future. Not everyone is willing to pay sticker for a car that's not equipped to their liking. And that should scare everyone.

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Source Credits: Reuters

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