New car wait times: any end in sight?

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Supply issues stemming from the COVID-19 pandemic have derailed many customers’ plans to buy a new car. What’s the likelihood we might soon return to a more consistent supply?

We’re seeing chronic stock shortages and long wait times for customers when it comes to the new car market. When the COVID-19 pandemic took hold over two years ago, few could have predicted its impact on buying a new car. Along the way, we have seen the forced lockdown of dealerships, semiconductor chip shortages and constraints on shipping supply lines.

While some customers are aware of the impact COVID-19 has had on vehicle supply, many are still surprised to find out how long they need to wait until they can get their new car. These long wait times are arguably the number one pain point being felt by customers at the moment.

And they’re not alone. With dealerships unable to take payment until the car is delivered and finance and insurance partners dependent on regular sales, the delays have widespread impacts on the sector. So what, exactly, is going on?

Supply issues set to continue

According to the Federal Chamber of Automotive Industries (FCAI), new car sales went backwards in April 2022, dropping more than 10 per cent below historical averages for the month ( VFacts April 2022).

That’s a lack of supply, not poor demand, causing the contraction. Waiting times for popular models currently extend from three to 12 months, and the situation looks set to continue. It’s estimated that vehicle shortages will continue for at least the next 12 months and possibly 18 months (Wheels, New Car Delays article).

“We know this is not a reflection on the demand for new vehicles in the marketplace," says Federal Chamber of Automotive Industries (FCAI) chief executive Tony Weber. "This is a reflection on the global automotive industry’s ability to supply vehicles to not only the Australian market but all markets throughout the world.”

Most major brands indicate they could deliver more vehicles if only they could get more stock. Of the stock that is arriving, most of it is to fill orders up to or more than 12 months old.

Knock-on effects for car finance and insurance

Mark Colyer, Allianz Auto State Manager (VIC, SA) says long wait times are detrimental to the dealership sales process, including arranging finance and insurance.

“Getting finance approval at point-of-sale and then having to get it reapproved near delivery time creates double handling,” he says. “A customer’s situation can change during the waiting period, which may affect the original finance approval. Insurance premiums can also go up between the point-of-sale and delivery, which creates a poor customer experience.”

There’s also the issue that if insurance isn’t presented at the point-of-sale, customers may choose to arrange their insurance prior to the dealer contacting them to arrange delivery. And re-engaging with a customer close to delivery time within the anti-hawking legislation can present a problem.

“Quite often, the customer is only engaged face-to-face on the day they pick up their vehicle, which is too late,” Colyer says.

So, what are dealerships doing to manage customer expectations? Many dealerships attempt to move customers to a more readily available car model. In the case of multi-franchise dealerships, that might involve moving customers to a different make of vehicle.

It appears that the majority of customers are happy enough to wait to receive their car. In such cases, sales teams and delivery coordinators keep customers informed of their order's progress, often by providing them with regular updates via email and text.

Colyer says some motor dealerships are taking the step of refunding customers their deposit or giving them a guaranteed trade-in valuation.

“Dealers are trying to absorb any finance rate or premium changes at delivery time,” he says. “If this is not possible, they are back to the start and have to win the customers’ business with new pricing.”

Though society at large has learned to live with COVID-19, it seems the car sector will have to live with the effects of the pandemic for some time yet.