How Car Prices and Inventories Greatly Affect Your Dealership

Posted by Steven Mendoza on April 6, 2022

Inflation has hit the dealership and automotive industry hard. Prices have climbed at the fastest pace in 40 years. The automotive industry has seen some of the biggest price increases in 2021 with used cars and trucks exploding by 37% and new vehicles climbing by almost 12% according to the U.S. Bureau of Labor Statistics.

"Prices have spiked during the recovery from the pandemic recession as Americans have ramped up spending on goods such as cars, furniture and appliances," writes Christopher Rugaber of Associated Press. "Those increased purchases have clogged ports and warehouses and exacerbated supply shortages of semiconductors and other parts. Gas prices, while declining a bit from November to December, have surged in the past year, in part because Americans have driven more in recent months after having cut back on travel and commuting earlier in the pandemic."

The ongoing crises greatly affected the supply chains that are struggling to keep up with high consumer demand for used vehicles. Inflation is the top threat to economic recovery from the pandemic. Economists do say the 7% inflation isn't yet something to be concerned about. However, if it remains at 7% a year from now, then it's a big problem.

The Effects of the Pandemic on Vehicle Inventory

There’s no question the pandemic wreaked havoc on the supply chain. And now, two years later, shortages still remain in one industry that has had lasting effects on the automotive industry. What is it? Semiconductor chip manufacturing.

Modern vehicles require chips for a number of safety and entertainment features. When the pandemic hit, auto manufacturers figured there would be a drop in demand for new cars. So, they cancelled orders for many components, including microchips. However, while the demand did drop, it was only temporary. It was too late by then because chipmakers routed those chips to computer and electronics companies.

Why? Because as students and workers switched to homeschooling, remote working, and online shopping, they needed computers, webcams, and other technologies to support their activities. This pushed chip makers to send their chips to companies making consumer electronics. As a result, new vehicles that needed the chips couldn't be built. Thus, it created an inventory problem for dealerships.

As soon as people started driving again and wanting to buy a new car, the price had jumped so high that it wasn't affordable for some. The only way to solve the problem is to make more cars or reduce demand for them. It's an impossible problem to solve.

The Rise of Catalytic Converter Thefts

As if the shrinking supply of vehicles wasn't enough, another problem has popped up that affects dealerships. That's catalytic converter theft. Before the pandemic, converter theft was barely a blip on the radar with an average of only 108 converter thefts per month in 2018. That number started climbing in the early days of the crisis in 2019 as the average more than doubled to 282 catalytic converter thefts per month as reported by the National Insurance Crime Bureau.

The next two years tell a completely different story as the number of converter thefts skyrocketed. The number of stolen converters multiplied to an average of 1,203 per month in 2020! By the end of the year, the number more than doubled to 2,347 in December 2020.

Crooks looking to swipe catalytic converters often target dealerships with their large inventory. A Texas dealership has had 21 catalytic converters removed from its new vehicles within a few weeks. This is where the vicious cycle rears its ugly head.

The supply for replacement car parts has dropped thanks to the thefts and the broken supply chain. Anyone needing a new catalytic converter will most likely have to wait for more than a month for a replacement.

Besides stolen converters, car thefts reached new heights in 2020 and 2021. The NICB reports vehicle thefts in 2020 increased by almost 10 percent when compared to the previous year. Things grew worse the following year as NICB issued a warning in 2021 about the historically high auto theft, violent crime, and carjackings.

"The nation is witnessing historically high auto theft, violent crime and carjackings. 2020 saw the most vehicle thefts in more than a decade," warns NICB in its news release. "Beginning in June 2020, the United States experienced a 13% increase in auto thefts, with 41 states seeing an increase over the previous year, a trend that has continued throughout 2021. More alarmingly, many major metropolitan areas saw dramatic increases in carjackings. Unlike auto theft, a carjacking involves violent confrontation with an offender who threatens the victim with bodily injury with a weapon or through physical force."

Something clearly needs to be done for dealerships to protect their inventory considering the National Automobile Dealers Association (NADA) reveals that 12% of a dealership's total sales and 46% of the total gross comes from the service, parts, and body shop department (fixed ops) sales.

On top of this, all of a dealership's biggest assets can't be locked inside a building. They have a lot filled with millions of dollars in inventory. Fortunately, there's something dealerships can do to help protect their inventory and increase efficiencies.

Protect Inventory with Remote Video Surveillance for Dealerships

The increase in vehicle prices and theft calls for a security system that meets the needs of automotive dealerships. A traditional dealership security system won't cut it because it's reactive. Besides, catalytic converter theft occurs very quickly. By the time a traditional security system recognizes it, the crooks are long gone.

Traditional security systems don't always sound the alarm when something is happening. For those that do react, there's no guarantee that it will send the appropriate first responders to the dealership. That's because the alarm or security company won't know if it's a medical, fire, or police emergency.

In some cases, no one knows anything happens until the first employees arrive at the dealership the next day. They'll notice something different or missing. If they have video recordings, they will have to search hours of video to find the incident. This is tedious and time-consuming.

The best option for dealerships is a robust security system that can help deter theft as well as enhance operational awareness. Activity such as vehicle drop offs, parts deliveries, unattended browsers, service lane overflow and key mismanagement take place all hours of the day. This leaves plenty of room for error and mishaps like inventory and building damage or injury.

One of the most economical and efficient security technologies for dealerships is an integrated security system with remote video surveillance that incorporates video analytics and an access control system. What makes this three-pronged approach extremely effective is that trained monitoring operators and video analytics put two different types of eyes across your entire lot: human and machine. This pairing maximizes their ability to notice a potential problem before anything happens.

Add an access control system to this and it'll manage who enters and exits the dealership and limited-access only areas in the facility. You may keep all the key fobs in a special area that contains a large Faraday cage to block electric signals to thwart mirroring. This helps prevent anyone from copying the key fob and stealing vehicles. This room should only be accessed by a few employees.

It's important to create a process for checking in and checking out key fobs. They should only be in two places: either in the room or in the employee's hands. They should never be in the employee's pockets or anywhere else.

The combination of live video surveillance and access control makes it possible to search for incidents that happened at a specific time. The access control system notes the time someone enters a room. This information can speed up the search for the right footage.

How Dealership Security Enhances Productivity

Video surveillance with remote monitoring and access control can help increase productivity. Thanks to Stealth video surveillance, one dealership stopped spending more than $20,000 a month on customer claims that the service department damaged their vehicles. This delivered an instant return on their investment in integrated security technology.

Stealth's team communicates with dealership management and shares video footage that shows how customers and salespeople move around the lot. This helps the dealership management team to look for improvement opportunities, which enhances customer service and operations.

Video surveillance with video analytics can help track customer behavior and show you which cars they look at and which they buy. This information helps you expand inventory management and marketing.

Dealerships collect a lot of customer information to complete financial transactions, and this puts them at risk for identity theft and fraud. They're also at risk for employee theft and embezzlement. Video surveillance can help reduce these risks and others.

To maximize investment and security, work with a company that has experience customizing security systems for dealerships. To learn more about dealership security, pick up this guide to four auto dealership theft trends or contact us with your questions.

Posted in: Crime Prevention, Video Security Systems, Security Guards & Savings, Video Monitoring