You see them at auto dealerships. Lots of last year’s models — mostly on sale. But what happens if they don’t get sold? That’s a question recently answered by an article in Reader’s Digest.
We read the article, found it fascinating and are now sharing what we learned with you.
Auto dealerships — as most of you know — are franchises. They purchase autos from manufacturers who have awarded them the franchise. Once they buy them, the dealership owns them lock, stock and steering wheel. It goes without saying that they sell the vehicles for a profit.
They hope for a high profit.
But once the vehicles are close to a year old the value drops. Plus, newer models are coming out and room in the showroom and on the lot — or lots — is needed to sell them. Unsold autos from last year or earlier in the year cannot be sent back to the manufacturer.
They don’t want them.
So to make a profit — or at least recoup the original cost — dealers have to sell them. And they have to sell them any way they can. What makes it tough is that there aren’t that many options to get them off the lot.
What some of them do is send what they have to markets where a specific model they can’t sell is in demand. Sometimes they trade with other dealers for vehicles they need or can use.
Others end up selling surplus autos at auto auctions. That means the dealership has to discount the price. That means they don’t make as much profit because the auctioneer has to be cut in on the total sale.
If shipping off, trading or auctions don’t work, some vehicles end up being used as loaners for those getting repairs done or for other work. That means the dealership eats the total cost.
The last thing a dealership will do — and this is considered the nuclear option — is to just price the vehicle to sell. That’s when — says George Iny of the Automobile Protection Association — a consumer needs to be thinking about buying that new car.
It’s the time to pounce because that’s when the new vehicle you want will be at its lowest possible price.
Source link: Reader's Digest