Dealers' Dilemma: Higher Prices or Happier Customers?

Consumers found it easier to purchase a vehicle this past February compared to January, according to CDK’s Ease of Purchase Scorecard. Greater availability of inventory was a major factor in that change.

In February, 85% of those surveyed found it easy to purchase a vehicle compared to 83% in January. Many more bought a vehicle at the dealership rather than ordering from the factory or buying a vehicle in transit. In February, 52% purchased a vehicle in stock, versus 36% in January. 

“What shifted for us is the change in people buying vehicles in transit and ordering from the factory,” Dave Thomas, director of content marketing and automotive industry analyst at CDK Global tells Wards. “We saw the shift in (vehicles) in stock taking the majority of sales.”

So, it got easier to buy a vehicle in February because dealerships had more inventory and more people bought a vehicle in that inventory.

For dealers, that means erring on the side of too much inventory if they want to offer the best customer experience, says Thomas.

The importance of having more inventory to create an excellent customer purchase experience could present a dilemma to dealers, he says. They have been very focused on the high profit per vehicle created by the low inventory, he says.

But in another CDK study, the Friction Points Study 2023, dealers listed “providing a terrific customer experience” as the top concern, five times more than the next concern, managing inventory to maximize profits.

That suggests dealers  may be willing to sacrifice some profits for happier customers.

And dealers may be able to have higher inventory, happier customers and higher profits. With more inventory, sales volume is going up. So, while the “sky-high record profits” may be gone, “there is still that multiplier,” says Thomas. “You want to take that profit per vehicle and multiply it by volume.”

Digital Options Equal Happier Customers

Among the purchase experience elements considered when arriving at the overall Ease of Purchase score was “Taking the test drive.” In February, 78% found that easy compared to 73% in January.

“That test drive is hugely important,” says Thomas, because it brings people into the dealership.

Discussing and agreeing to a final price was also easier in February – 61% found it easy versus 58% in January.

But being able to negotiate the price before arriving at the dealership to complete the purchase is important, says Thomas.

“We saw multiple comments that people enjoyed negotiating the price online before they came in,” he says.

In general, allowing a buyer to do as much of the purchase online as possible before coming into the dealership “is tremendously valuable,” says Thomas.

Nonetheless, he says only 2% completed the entire purchase online in the survey. In February, 70% of those surveyed started and finished the transaction at the dealership, not including research.

Agreeing on a trade-in value is one part of the purchase experience that got more difficult–only 47% found it easy in February versus 52% in January.

That is likely due to the unsettled used vehicle market, says Thomas.

My main thought (as to what caused the change) is the volatility of the used car prices in general,” he says. “They went in expecting a lot more than they got.”