For Car Buyers, Custom Orders Could Replace Haggling Over Price
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Here's your Money Briefing for Thursday, August 19th. I'm Charlie Turner for The Wall Street Journal, filling in for J.R. Whalen. Ford wants more customers to order vehicles straight from the factory rather than picking one out from the dealer's showroom. The company hopes this new business model will help its bottom line. But what about car buyers?
For consumers, it may mean less selection on the lot, And it may mean that you're not getting as big a discount because the discounts flow when the car companies push too many vehicles onto their dealer lots and they got to get rid of them.
Coming up, our auto industry reporter Mike Colias will talk about Ford's new strategy and how it could change the experience and cost of buying a car. That's after the break.
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What is Ford's plan to shift more sales to factory and online custom orders?
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If you're looking to buy a new vehicle from Ford, you may have to wait a while. But that's by design. Ford plans to do a bigger portion of its sales by having buyers order from the factory and wait, rather than buy at the dealership. It's a big departure from the way Ford and all the major U.S. car companies sell vehicles, and it could be a major adjustment for customers who like car shopping. Mike Collias is our autos reporter, and he's here to discuss the changes with us. Hi, Mike. Thanks for joining us. You bet. Thanks for having me. So, Mike, how would this idea work in practice?
The way this would work is most likely you'd come into a dealership. You realize quickly they don't have exactly what you're looking for. So the dealer would help you to order, you know, factory order exactly what you want. The right, you know, the interior color, the exterior color, the trim level. And then you'd wait for that vehicle to be built. And that can be a matter of several weeks or even a few months or even longer right now because there's been a lot of production problems. So it's just a different way. It's sort of that instant gratification of driving your car off the lot that day. Some people wouldn't have that satisfaction.
Well, let's go into that further. Why is Ford doing this?
Well, for the last several, pretty much all year, most of the car companies have been working on – historically low inventory at their dealerships. And that's because the pandemic came up last year, shut down the factories, so they were already low. Then starting in January, this chip shortage hit. And so Ford has less than half of the cars it normally does on their dealers' lots. And so one byproduct of that sort of unexpected result is that both the dealers and the car companies have been more profitable by operating this way. They haven't had to offer as big a discount. And so what Ford's saying is, You know, if we can get some certain percent, almost nobody does this now, orders their car, you know, custom order through the factory.
If we can do that for even a quarter of our customers, we take a lot of costs out, we don't have to spend as much on discounts, and they see it as boosting profitability.
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