When you drive to a car dealership, you always see it: Row after row after row of cars. However, unfortunately for the dealership, not every car ultimately gets sold. That begs the question: What do they do with all of the unsold new cars? There are many options for them, and which option a dealership
When you drive to a car dealership, you always see it: Row after row after row of cars. However, unfortunately for the dealership, not every car ultimately gets sold. That begs the question: What do they do with all of the unsold new cars?
There are many options for them, and which option a dealership selects ultimately depends on a dealer’s location, overall network, and why a vehicle didn’t sell. First, there may be regional differences. What sells in one region may simply not sell in another. If that’s the case, a dealership may trade cars with another nearby dealership. There’s an expense here, as this may mean paying for the actual transportation of a car from one dealership to another, and that cost can be somewhat expensive if another dealership is far away.
If a car is nice enough, a dealer may turn it into a “courtesy car” that they give out if someone brings in their car for repairs. However, this also represents a loss, as the car then cannot be sold at its original price. Furthermore, most of the time, dealers prefer not to use a nice, new car for these purposes.
Car dealerships may also alter the incentives to their salespeople. For example, they may increase bonuses or commissions for selling cars that otherwise haven’t moved off of their lot. This, ideally, will motivate them to sell the car and get rid of it. When combined with additional financial incentives or price flexibility for consumers, this may provide a powerful incentive for someone, somewhere to purchase the previously unwanted car.
Cars may also be put up for auction, allowing someone else to purchase it from an auction house. Again, this is not an ideal scenario: There is no way a dealership will be able to recoup the same price when they make the sale and they will also have to pay a fee or split a portion of the proceeds with the auction house.
They may also tank the price, making it so low that it is virtually impossible for it to not sell. Obviously, a dealership will lose quite a bit of money on this sale, but they will at least be able to get rid of the car and free up more room on their lot to sell another car. For dealerships, time and space is money, and moving a car quickly – even at a significantly lower price than they prefer – may be able to help them to turn a profit later down the line.