Car buying is never going back to normal

• Supply-chain snarls revealed buyers are willing to wait for the car they want.
• Car dealers are now keeping fewer cars on lots.

For the past few months, car-buyers have probably seen more vehicles on dealership lots than they have for a while. It means that, after more than two years of little choice at dealerships, consumers could be in luck — but not that much.

Before the pandemic, auto dealers would keep at least enough cars on the lot or on order for about a 60-day supply.

Then COVID-19 limited production, leading to fewer choices and jacked up prices, as dealer supplies dropped to as little as a month's worth. Things got better in the back half of 2022, as production returned and demand sagged. New-vehicle inventory hit a 53-day supply in November, per Cox Automotive, the highest since March 2021. It was up from 50 days in October and 40 days in September.

Changing dynamics mean we're not going back

That doesn't mean everything's going back to normal.

"We will never go back to the inventory levels that we were in the past," GM CEO Mary Barra told analysts in a Wolfe Research conference last February.

Execs at Ford and Stellantis (the Detroit-based parent company of Fiat Chrysler and PSA Group) have expressed similar views in the past few months.

"The domestic brands have a 30-, 40-day supply, which is still very, very low compared to historic levels," said Zack Krelle, industry analyst at TrueCar.

"It's certainly better than it was a year ago," Krelle added, "but nowhere to the level of abundance that it used to be."

That may be because over the past few years, automakers learned that customers will wait — and pay — for what they want. Even if they could revert to pre-pandemic inventory and wipe away supply chain issues, car-buyers have adapted to pandemic-induced trends.

A recent study out of consultancy Deloitte found that 48% of US consumers don't mind waiting anywhere from three weeks to three months for their next vehicle. Deloitte said the shift in attitude on waiting time could open the door to more "build-to-order" sales, which would make big inventory less necessary.

Especially with the dawn of EVs, Ford's CEO Jim Farley anticipates banking on a low-inventory, build-to-order approach.

"The customer orders a vehicle, and then we ship the vehicle to the customer," Farley said in a Q2 earnings call. "That's what I mean by a low inventory model."

The bad news for buyers

Operating with lower inventory could continue to hurt customers, however.

It doesn't mean consumers are going to have to keep fighting just to get any vehicle, but it indicates that if carmakers don't need to have cash tied up in inventory, prices can likely stay high (an average of $46,382 for a new car in December, per J.D. Power), and dealers don't have any reason to offer customers incentives.

Perhaps there will be one or two standout brands that decide to capitalize customer frustration. "I expect there to be a haircut from what we had seen from years prior," said Edmunds' Ivan Drury. But, "They're never gonna match that supply and demand one to one perfectly.

"I fully expect somebody to break from the pack and really just juice their sales by having excess inventories and providing those discounts."