Cars sales were down, but dealers had their most profitable year yet, why?

2020 was an AWFUL year for new car sales. At the start of the 2nd quarter, dealers and manufacturers were hit with factory shutdowns which cut down inventory. Then dealers were faced with lock downs which forced dealers to close. Finally, when the dealers were allowed to start opening up in limited capacities, they were hit with customers who were hesitant to buy a new car due to the economic uncertainly the world was facing. In turn, Automotive News reported new car sales were down 14.6 percent yet overall dealer profits went up a remarkable 48 percent. How?!

Well put simply, dealers found more profit in the customers they could get in the door. Yes, they jacked their prices and took every customer for every extra dollar they could. How could they do this? Well COVID-19 helped in that by shutting down the factories which limited the inventory available on the market. Simple economic terms stay supply and demand are closely tied together. With a limited supply but still a strong demand, dealers could ask for more.

2021 doesn’t look much different either, with COVID-19 restrictions continuing it could be another record year for dealers.

About Nick

Nick resides on the West Coast and lives for cars. He has a unique passion for old American FWD V-8 vehicles and his current daily is a 2004 Buick Century. He does also have a 2003 Porsche 996 Turbo, and a 2018 Kawasaki ZX-10R.