Dealer Pulse: Inventory Shortage, Hurricane Season Throw Texas Dealers Some Curveballs

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Dealer Pulse: Inventory Shortage, Hurricane Season Throw Texas Dealers Some Curveballs

by TIADA Staff

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nventory. A word likely to come up within the first couple of sentences of a conversation with an independent dealer. It’s well known that many used car dealers are dedicating more time to beef up their inventory these days. But the question is—what are dealers doing to manage inventory, how are they doing it, and how are they faring during one of the most active hurricane seasons? (Okay, three questions.)

Texas Dealer reached out to a few dealer members along the coast to hear how they are managing their inventory and moving ahead with their businesses during the pandemic and hurricane season.

Expanding the Market

Inventory is down at least 30 percent, according to the dealers Texas Dealer visited with in September. Harold Tarver of A2B Auto Sales, a dealer in North

Houston who joined TIADA in 2020 is taking it in stride, continuing to go to the auctions and taking a bit more time before moving forward with a purchase. “With vehicle prices being higher right now, it’s a more tedious process as far as checking out the cars and making sure it’s a good buy,” said Tarver.

In response to this shortage, a few dealers shared that, in addition to going to the auctions they customarily visit, they are also exploring other avenues. “We’re taking advantage of being able to use the online auctions,” said Christina Sabillón of Mi Tierra Auto Sales in Houston. “In our case, the numbers have been flipped. We now do approximately 80 percent online, 20 in-person.”

Several dealers shared they are spending more time on the road, searching for inventory. For instance, located just outside of Houston, Vicki Davis of A-OK

Auto Sales in Porter says they now We’ve gone directly to them to see if sometimes buy vehicles in San they’ll sell directly to us. We’ve been Antonio and Austin. Similarly, picking up inventory that way as Cristo Mendoza of Mendoza Auto well,” noted Christina Sabillón. Sales in Donna, who typically visits auctions in San Antonio, has now Pushing Past Uncertainty also started purchasing vehicles in “I think a lot of people are just other cities, including El Paso, and scared, scared of what’s going to then coordinating transport of the happen, what the future’s going to vehicle back to his dealership. be. With unemployment, the elec

Efforts to acquire inventory tion, there’s a whole lot of uncerdon’t stop there for some dealtainty,” said Davis. ers. “Another outlet we’ve started With multiple variables in play, utilizing is going directly to a new projecting sales and needed invensource, like car rental companies. tory over the long-term can be JULY-TLSAA Lubbock_TIADA ad.pdf 1 6/30/20 10:55 AM

a challenge. For example, Lowell Rogers of 11th Street Motors, a BHPH dealer in Beaumont, says they saw an uptick in sales when stimulus checks were distributed, but have recently noticed sales slowing down. Without knowing if another stimulus payment is coming, he says they’re approaching things “one day at a time,” adding, “I’m not loading up the lot completely because I feel the prices are going to come down between now and the end of the year.”

Trade-Ins

At A-OK Auto Sales, Vicki Davis says her staff has focused on calling and emailing customers to see if they want to trade in their vehicles. “Before the pandemic, we used to wait until customers were paid down lower, but now we’re reaching out to them sooner and trying to get them to pay off their vehicle; for those who are paid off, we try to see if they want to come in and trade in.”

Identifying Customer Needs

Cristo Mendoza says he has adjusted his strategy for acquiring inventory by going directly to his customers to better understand their needs. He says his dealership has added a new “Car Finder” page to their dealership website as a way to limit their inventory to only “certain used cars based on specific customer requests.” The page allows interested buyers to enter desired make, model, year and mileage for the vehicle they are needing along with price and the customer’s contact information.

Keeping An Eye Toward The Sky

To make matters more challenging, the highly active 2020 hurricane season has dealers along the coast keeping an eye toward the sky. Located in Beaumont, Rogers vividly recalls his experience with Hurricane Harvey in 2017. “We got lucky in the sense that we didn’t lose any cars. We knew a hurricane was coming, nobody had

any idea what kind of rain that was going to be carrying. The forecast said 50 inches of rain, and I didn’t believe them. I thought there’s no way it’s going to rain 50 inches— well, it did.”

Those who experienced the impact of Hurricane Harvey and other storms have since walked away with a few lessons learned that they say have prepared them for future storms, including:

Planning Ahead

Be ready to move your inventory. “Stay in tune with the weather, pay attention to what’s going on, particularly how much rain you’re going to get; if you are located in a flood zone or have flooded in the past, be ready to move those cars. Find some place to put them on higher ground,” Rogers of 11th Street Motors in Beaumont said. Doing so saved his inventory from flood damage. “Insurance companies will want to know what your plans are also in case of a flood,” he added. Checking for Flood Damage

About 45 minutes from the closest Louisiana auction, Rogers says hurricane season means heightened awareness. “If you know the area is somewhat flooded, we look at that car closely to determine whether that car has been under water in any form. We’ll check the trunks, look for signs of residue being in the trunk or up underneath the seats, we’ll check all the metals underneath the seats. We’re looking for waterlines particularly inside door jams.”

“Water lines are key,” said David Sabillón of Mi Tierra Auto Sales. “If you have the ability to physically touch the vehicle, inspect it, go look to see if there is a differential in the lines in the motor to see if there are water lines, rust underneath, a smell indicating possible mold, lifting the carpet and pulling up panel off the door. You can catch mud and leaves on that bottom panel door.”

Rebuilding Customer Trust

Following Harvey, Rogers says building customers’ trust, particularly after such a devastating event, is important. “We have a pretty big Facebook presence, so we shot a commercial and I basically went through walk arounds to show customers what we look for and give them reassurance that we’re not out there buying flood cars and turning around and trying to sell them these vehicles.” In that commercial, Rogers encouraged customers to use the same practices to look at the cars they were considering, as a way of helping them determine whether they had any issues or maybe flood damage.

Know Before You Go

There is more to consider when purchasing a vehicle, particularly during the hurricane season, said Orlando Orijo with The Majestic Star Group, a dealer in Houston who also recalls his experience with Harvey. When inventory is tight, Orijo says that, as a small business, he makes sure to follow these practices closely:

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Be aware of arbitration procedures for each auction, including procedures related to flood damaged vehicles. “Every auto auction has a different arbitration policy,” he added, “so it’s very important to check before you start buying these cars. You want to protect your business,” Orlando said. Take your time, preview the vehicles one day before Even if there is no flood damage, inspect your car

Certainly, there is no one way dealers are approaching the changing landscape. However, after visiting with several dealers who are located along or near the Texas coast, the general feeling among these dealers might be best described as cautiously optimistic. Despite the various challenges presented by the pandemic and now the hurricane season, dealers shared some positive words about the industry as well.

For instance, Rogers describes meeting customer demands as “manageable” overall. “As long as you’re getting them into a car that’s affordable to them, the results are typically going to be the same. The good times are not going away. Business is a little better than we predicted it would be even though price of inventory is what it is.”

At the end of the day, Christina Sabillón says “transportation is always going to be a necessity, an essential, so the demand will always be there.” And for those just starting out with their business, she added, “If anyone’s brave enough to start a dealership at this time, know that your vision of providing transportation for the public and being able to do that is still possible.”

On August 25, 2017, Hurricane Harvey, the first major hurricane to hit the United States in over a decade came ashore in Texas. As expected, many communities in its path along the coast suffered extensive damage. The highest rainfall total recorded by the National Weather Service was 51.88 inches in Cedar Bayou, TX. Other parts of the region, including portions of the Houston metropolitan area, saw rainfall totals exceeding 40 inches in just a few days. All this water created extensive flooding that devastated large portions of the state, destroying homes, businesses and property.

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