if you've ever driven by a car dealership and seen rows and rows of brand new cars you've
probably wondered what happens to the ones that just don't sell the ones that people don't want
well millions of cars are produced every year and not every car is sold what happens to them
is the big question they don't give them away you wish if the price is reduced too much it
reduces the sales volume of the newer vehicles the more expensive ones that are coming in
so they have to be really careful about what they do with each vehicle representing about 30 000
on average the typical dealer doesn't want to keep these vehicles on the lot it's expensive to keep
them in stock and brand new cars and trucks and suvs that aren't sold can't just sit there forever
because that's an investment and it's too expensive to let them sit there and it's natural
for a consumer to ask the question so what do they do with all those cars that they just don't sell
welcome back to the channel on Lauren Fix, if this is your first time the channel we give you
a lot more than car reviews and first looks of new vehicles we give you car smarts because we
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we answer the question what happens to new cars that don't sell well if you think about it that's
quite an interesting question because the auto business unlike any other has access inventory
that can't be sold at any place like big lots or a liquidator to answer this question you'll need
a quick lesson in how the industry works it's a little bit different than some of the others
first it's useful to know that car manufacturers traditionally do not sell vehicles directly to the
public in fact in many states it's prohibited it's called franchising law and that law is in place
to protect you as the consumer instead of selling direct to consumers like you might see from tesla
they have to go through a dealer structure a franchise dealer who in turn sells the vehicle to
you the general public so the manufacturers direct paying customers are car dealers and the car
dealers direct paying customers are you car makers get their money from the dealers in exchange for
vehicles that they carry in their inventory and they sell those vehicles to the public it's pretty
easy to understand simple right but there are some exceptions like tesla and a few others where you
buy directly through them but they're considered a tech company completely different what this means
in practice is that unsold vehicles and that includes tesla perhaps a better way to put this
slow selling cars are the problem of individual dealers dealers can't send those vehicles back
to the manufacturer for a refund the only recourse they have is moving the iron as we call it in the
business dealers have to find some way somehow to sell every vehicle that comes on their lot
that they buy from the manufacturers because they bought it it's theirs and no dealer wants
to sit on these vehicles forever they will take a loss and that doesn't make sense in business
two factors put pressure on the dealers to sell quickly this is called turning the inventory
a non-selling car that takes up space of a newer car that might sell quickly or it's
more profitable that's a problem this is true for most industries don't let it just sit there
get rid of it but there's another factor that's equally important most dealers don't buy the
cars they sell outright for cash they finance them and that's called as we call the business quoting
floor planning or loans so each car that sits on the lot is costing them interest on those loans
time is literally money the longer a vehicle sits without selling that vehicle the more it's costing
them this is why dealers are so excited at the end of the month to make a deal get that vehicle off
the lot and maybe not so excited on the first week of the month because they paid interest for it for
that whole month to the bank and they obviously want to make use of the money so how do dealers
sell their unsold cars well if the consumer is interested in a particular car that's been
sitting on the lot for more than 90 days 120 days the dealer is more motivated to sell that
car it's costing them money every single month so it makes sense to look for a vehicle that's been
sitting there maybe last year's model or something that's maybe parked in the corner because they're
ready to negotiate but they're not going to give it away this is where car smarts makes
sense and that's why we say knowledge is power many dealers will try to motivate the sales staff
of slow selling vehicles by offering them special discounts or incentives or spiffs to the
salesperson if they can sell them that's why so many salespeople will steer you toward a vehicle
that has nothing to do with what you're looking for and you're thinking why are they doing this
it's because they want to sell the vehicle because of the spiff it's in it for them
to get that vehicle off the lot in addition the dealer will frequently offer larger discounts on
slow sellers vehicles that have been sitting that because they want quick moving vehicles to go in
the manufacturer always gets into the act because it's in their best interest for the dealers to
sell the vehicles so they can buy more vehicles makes sense right keep filling the pipeline that's
why manufacturers offer incentive programs like cash back offers special subsidized lease deals
zero percent and other low interest rates you see these all the time including great financing deals
it's because they want to get those vehicles off the dealer lots another option for dealers is to
put a slow seller into a loaner car so if you go into the service department they give it as
a demonstrator or a loaner car and then they can sell it as a used vehicle knowing that it actually
filled a void of something they needed by doing this the dealer is transforming slow selling new
cars into newly used vehicles that they then can typically be sold as substantially discounted form
from the manufacturer's suggested retail price so that's another way to get a good deal in certain
circumstances dealers might trade vehicles to other dealers and this would depend on where they
are they're called dealer trades and you might find that if you're looking for something the
dealer doesn't have but they can do a swap maybe it's a convertible or an all-wheel drive or maybe
it's an ev that doesn't sell well in a certain area the dealer will do a dealer swap and
therefore they can get the vehicle off their lot and trade it for something that dealer can't sell
smart way to get rid of vehicles a final result for the dealer with vehicles that don't sell at
the dealership is to sell them at an auto auction now there are national auto auctions all over the
country including online versions for new and used and leased trade-ins so those vehicles would then
go to another dealer or used car lot they can't go to the consumer so you cannot get into these
places unless you get a friend who's going to help you out but that's a whole other story in itself
the idea is to offload that vehicle get rid of it get it off your lot get as much cash flow as
you can because it's called a dog sorry to put it that way because i have dogs and i love them
but it's haunting them it's sitting on their lot and they're taking a loss they need to get rid of
that vehicle and this will help cut their cost for the dealer there's lots of ways to save money you
can check out my book laurenfix's guide to loving your car i got a lot of great tips in here because
i always say car smarts will help you get the most of your vehicle not just when you buy it or when
you maintain it but all those things that happen during the life of a vehicle so what happens to
brand new cars that never get sold well there's more than meets the eye if they flood the auctions
and cut the prices too much it's harder to sell the new vehicles that are coming in every day
and they end up cutting themselves out of the picture that doesn't make a lot of sense
now the final option for the manufacturer is slightly different from that of the dealer and the
industry has a huge outdoor parking lot that they park hundreds of cars that don't get sold every
year they call them car graveyards they don't get sold they don't get sold at dealers they can't get
rid of them what do they do well manufacturers may help to sell those cars by offering them to
employees manufacturing plants hey do you want a discount on a car you can get all kinds of
incentives they try to get rid of the product at a lower price and hey if you're making the car
we want you driving that vehicle and there's all kinds of incentives and perks for them to do that
yeah it's true these cars just sit around and rust like a car cemetery and they're all over the world
they sit at abandoned air bases and parking lots manufacturers want to sell newer cars as it's more
profitable they don't want to flood the market with last year's model as they need to sell the
newest products the newest technology if they did that the production of the current model would be
slower and this could impact employees with less work so think of it like the domino theory they
can't produce the exact amount because they don't know exactly what they're going to need
realize that this is a loss and it's figured into the cost of the vehicle the same is true in the
food business they don't sell all the produce that you see out every day that's fresh some of it goes
away they have to throw it away and that's called shrinkage and a lot of industries have it and it's
figured into the cost in the bottom line when you go to pay for it now you can take a look at some
of these car cemeteries some of these cars are ready to ship to dealers well there's will never
move again even tesla has made more vehicles than it'll need and they have the exact same problem
this is no joke these cars sit and wait tons of unsold cars sit every day did they ever move
well the market is about selling newer models not older cars and some companies ship them to other
countries to get rid of them at lower rates and some eventually are dismantled and destroyed it's
kind of sad actually the cost of doing business that costs the manufacturer and the dealer and
that's all bundled into the total price you pay here's the bottom line the dealer needs to sell
the car or the unit with incentives to get it off the lot even if they take a loss they bought
it they need to get rid of it keep lowering the price until somebody buys it the dealer does find
a buyer eventually for the manufacturer it's the cost of doing business and it's figured into the
bottom line cost if you're looking for a great deal ask what's the oldest new car on the lot
and if the car is on the lot for more than 90 days the dealer will be more interested
in making a deal with you rather than if it just showed up last week don't forget to check out our
new website car coach reports we have some new contributors we're in english and in spanish and
some great articles and some other subjects that i don't cover we'd like you to stop by
there also check out our podcast total car score we're having a lot of fun it's on all platforms
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