After facing unprecedented challenges such as COVID-19 shutdowns, supply-chain disruptions, and labor strikes, automakers are at last making strides in replenishing the inventory of cars in the US market. At the start of June 2024, the total supply of unsold new vehicles reached 2.89 million units, marking a significant increase of over 1 million units compared to the previous year. This surge in inventory volume represents a remarkable 55% growth from the same period last year.

However, as the automotive industry experiences this resurgence, it is crucial for auto dealerships to remain vigilant and aware of the potential risks that come with rising inventory levels. These risks include:

Theft and vandalism:

With a larger inventory, the risk of theft and vandalism increases. Dealerships may become attractive targets for criminals, leading to potential losses and damage to vehicles.

Hail, fire and other natural disasters:

A higher inventory level means a greater concentration of vehicles in one location. This increases the risk of fire, flood, hail or other natural disasters causing significant damage to a dealership's inventory. For more information on how auto dealerships can protect their inventories from hail, read our recently published article, Shielding your inventory: hail protection measures for auto dealers.

Accidents and collisions:

More vehicles on the lot can increase the likelihood of accidents or collisions, both among a dealership's employees and potential customers. This can result in property damage, injuries, and potential liability claims.

Insurance considerations:

As inventory levels continue to grow, it is crucial for auto dealerships to reassess their insurance policies and ensure they accurately reflect the value of the vehicles on their lot. Key considerations include:

Adequate coverage limits:

Maintaining sufficient coverage limits is essential to protect against potential losses or damages. Auto dealerships should regularly review their policies to ensure they align with the current value of their inventory.

Avoiding underinsurance penalties:

Failure to maintain adequate coverage limits may result in underinsurance penalties, where the dealership becomes responsible for a portion of the losses. To avoid such penalties, dealerships should work closely with their insurance advisor to accurately assess the value of their inventory and adjust coverage limits accordingly.

By addressing these potential risks and ensuring adequate insurance coverage, auto dealerships can navigate the challenges of rising inventory levels and protect their business.

Victor has been writing auto dealers coverage since 2014. Collaborating with carrier partner, Allianz, has enabled Victor to continue to provide market-leading coverage and persevere amongst challenging conditions, offering comprehensive coverage that includes Garage Liability, Property, Umbrella and Dealer Open Lot coverage.