‘Not Since World War II’: How a 4th-Generation Car Dealer Is Handling a Historic Price Storm
HARLINGEN, Texas—Jacob Boggus has never seen anything like this. The general manager of a Ford dealership in the Rio Grande Valley has been in the auto business for a decade, but the dealership has been in his family since 1933. So Boggus asked his grandfather if he’d ever experienced conditions like today’s wild swings in price and demand for new and used cars. “And he said ‘not since World War II.’”
Consumer Price Index figures released this week showed the largest one-month jump in prices since June 2008. The culprit behind the surge in inflation was somewhat unexpected: Used cars and trucks were responsible for a significant portion of the increase. A global semiconductor shortage has bedeviled the auto industry for months. New vehicles can be hard to find, driving up prices for used ones.
Barron’s is having conversations with business operators caught in the middle of the shortage economy. In his office at the Boggus Ford dealership, decorated by yellow post-it notes filled with reminders, Boggus said the chip shortage has cut supply. But there are plenty of buyers.
“With all the government stimulus and pent up demand from last year, it’s kind of a crazy storm of low supply and extra-high demand. The chip shortage has certainly increased the values of the used cars… and created the low supply of new. So we’ve seen some vehicles increase in price upward of 20, 30% in a matter of a few weeks.”
New cars are selling for as much as $5,000 above sticker price, Boggus said. Used cars are going for as much as 110% of their market value.
“It’s not that we’re trying to gouge, it’s that we know we can’t sell as many new cars so we’re having to maintain a gross level that can support the business, support the people, without having to lay anybody off… On the used car side it’s really not any different because you’re buying the cars more expensive and you’re selling them more expensive. The in-between isn’t that much more than it used to be, it’s just that the demand is there.”
These new challenges are changing the Boggus family’s strategies for acquiring inventory. A massive banner in front of the dealership reads, “SELL US YOUR VEHICLE, NO NEED TO BUY!” Post too long. Click here to view the full text.