The roller coaster economic ride that began with the emergence of COVID-19 in early 2020 has reshaped how car buying works. Will it ever get back to what we might call “normal?” Brian Finkelmeyer, senior director of new-vehicle solutions at Cox Automotive, likens it to a staring contest “between consumers, dealers, and automakers. The question is, who will blink first?”
The car business has strange mechanics, so some explanation is in order.A complex relationship controls car prices Traditional automakers don’t sell their cars directly to consumers. They sell to a third-party — dealerships — who sell to you. A few more recently-born automakers, like Tesla
TSLA,
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and Rivian
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sell cars directly to consumers. But they don’t operate in every state because that business model is illegal in many places. So the industry, on average, still works through a third-party sales model. The companies building cars and the companies selling them spent most of a century evolving a common approach to inventory. By the early 21st century, most dealerships aimed to keep at least 60 days’ worth of cars in stock and another 15 days’ worth on order or in transit to sales lots. That supply meant a dealer usually had the combination of colors and options a customer was looking for in easy reach. The dealer purchased each car from the automaker (often through a loan from a bank also owned by the automaker) for a set price, then sold it to …