Car dealerships have turned ‘cutthroat’ amid a buying frenzy and dwindling car inventories

Car Dealership
  • The frenzied car market is pitting car salespeople against one another, Bloomberg reported.

  • New and used car prices have skyrocketed during the pandemic amid a shortage of vehicles.

  • Some dealers are even shelling out to buy leased vehicles years before the end of their term.

  • See more stories on Insider’s business page.

The pandemic has upended the market for new and used cars, sending prices skyrocketing and inventories dwindling.

A buying frenzy – coupled with soaring prices and a historically low supply of vehicles – has turned car salespeople into enemies, one dealership employee told Bloomberg.

“It’s really cutthroat,” Jared Luner, a salesman at Columbia Honda in Missouri, told the outlet. “Normally we’re all friends and coworkers, but right now, when someone pulls up, it’s a little edgy.”

Luner said he recently had a fellow salesperson sell a vehicle out from under him. Hawking cars was always a tricky business, but now, as dealers suffer from a devastating lack of inventory of both new and used vehicles, there aren’t as many sales to go around.

In June, new-car inventories stood at less than half of 2019 levels, according to Cox Automotive. And the crunch is only getting worse as a global shortage of computer chips continues to force automakers to idle production lines and slash manufacturing targets.

Mark Scarpelli, who owns two Chevrolet dealerships in the Chicago area, recently told The New York Times his lots typically have between 600 and 700 cars. Now, he’s down to around 50.

While the chip shortage directly impacts the supply of new vehicles, it’s also bringing a new wave of customers to the used market, slashing inventories and driving prices skyward. This is all happening as demand for cars remains strong, due in part to low interest rates, a robust economic recovery, and travel habits that are still in flux due to the pandemic.

The insane market has pushed dealers toward increasingly crafty methods of obtaining used cars to sell.

Dealers are so strapped for inventory that they’re calling up lessees – no matter whether they sold the vehicle or not – and offering to buy leased vehicles for high markups, Ivan Drury, senior manager of insights at Edmunds, told Insider.

“They’re being contacted right now and being told: ‘You can sell that. We will not just pay the buyout price. We’ll pay all your payments and hand you a check on top of that,” Drury said. “Dealers are very desperate for inventory. They’re willing to make those payments, pay that buyout price, and get that piece of inventory back.”

The supply crunch is so dire that Drury has heard of people who are less than a year into a three-year lease being contacted by dealers. Since used-car values are so astronomical right now and many people haven’t been putting as many miles on their vehicles, those who are able to part with a lease stand to make a killing selling it to a dealer or online retailer, he said.

“You actually stand to make money in that situation because supply is just so drained,” Drury said. “There’s a lot of power for someone who currently owns a vehicle.”

Are you a car dealer, owner, or private seller with a story to share about what it’s like to buy and sell cars right now? Has a dealer offered to buy your used or leased car? Contact this reporter at [email protected]

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