It’s 2020, which means new car models have already started rolling into dealerships and taking their positions in gleaming showrooms. What happens to the “old” models, which fall into a gray area between not-quite-used and no longer new?
According to Reader’s Digest, brand-new cars that fail to find a forever home have a few different fates. One place they can’t go is back to the manufacturer: Once a dealer purchases an inventory of cars from, say, Toyota, the vehicles are theirs. Instead, dealers may look outside of their local market to see if there’s a demand for the make and model they have on hand. A two-door sedan might not have found a buyer in one town, but there might be someone else 50 miles away looking for one.
If they can’t find a buyer close to the retail price, they might consider offering the car at an employee discount—as much as 20 percent—to customers. They might also offer financing incentives to make the deal more attractive.
Dealers typically hang on to new cars for about two years. After that, they begin to grow concerned that customers might assume there’s something wrong with a vehicle that’s been loitering on the lot for so long. Once it finally loses that new car smell, it might go to a dealer auction, where buyers can pick up cars for resale. Some of the cars will wind up in smaller lots, where there’s no pressure to offer a fleet of brand-new models.
Auctions take a percentage of the sale, though, so dealers already discounting the car might take a loss. You might also see a nearly-new car used as a loaner for the dealer’s service department or sold to a rental car company.
One thing is for certain: Dealers don’t like having old model year cars on the property. Because of the need for discounts or other incentives, dealers spent an average of $1100 in incentives per vehicle in 2019 to move 2018 models out the door.
[h/t Reader’s Digest]