When dealerships take delivery of cars from the manufacturers, they buy the vehicles themselves, so they own them. Therefore, if the cars go unsold, dealerships typically can't just send them back to the manufacturers and get a refund. This is because the manufacturers have already sold the vehicles to the dealerships, and the dealership then marks the cars up to try to resell them for a profit.
So then what happens to the cars that go unsold? The dealerships won’t leave them on their lots for years if they don’t sell because they need to keep the lot stocked full of the newest models. So with that in mind, dealerships’ options are limited when it comes to getting their profit out of the unsold cars. The only options that they have will take the form of either keeping them for themselves or taking a chance at losing a bit of money on the deal if they have to lower the price enough to get it moved out.
One option they have is to drastically lower the price and try to break even or make a small loss. That isn’t ideal from the dealer’s perspective, so they also may let it go to auction where it can fetch a better price. The issue with letting the cars go to auction is that auction houses, of course, take a percentage of the sale price. Again, dealerships are forced to settle for breaking even or even taking a small loss. Another option is to keep them as loaner vehicles for their customers to use while their cars are being serviced. Although this brings in no money directly, they can still sell or auction the car off after it’s life as a loaner to regain some value.
So while the dealership's options aren't great when they're looking to make a profit, the customer's options get better when a dealership has to start looking to offload their old inventory before the new stuff takes over their lots. That's where you can come in and take advantage of the situation.
The best case for the customer is usually when the dealership lowers the price and sells it off their lot at a discount. It’s great for the average consumer because you won’t have to go to a vehicular auction and deal with trying to buy the car there. Depending on what the dealer’s markup is on the price they paid for the manufacturer’s vehicle, a discount down to their purchase price or even slightly less can be dramatic and save you thousands of dollars.
Now you’ve decided that you want to try to get in on the action and see if you can take advantage of a dealership unable to sell a car. There are a few tips and tricks along the way that will benefit you even more and help you get the best deal you possibly can.
The main reason that dealerships want to get rid of the cars that didn’t sell is to make room for the new inventory to come in with newer models the following year. With that in mind, you’ll want to think about when the next model year starts coming out so that you can know when to start looking for those sweet deals. New models start being purchased by dealerships during the Fall rather than the end of the year, so September - November is going to be your best bet. After that date, cars produced and sold to dealerships will be the following model year, so the dealership will want to free up some inventory space.
One of the biggest mistakes you can make with a big purchase — which cars will undoubtedly qualify as — is not to do your homework and have an idea about what kind of car you want. Gain an understanding of the new models coming out, what types of vehicles have historically been sold for after going unsold, and browse the inventory online to get an idea of the car you want to buy. If you’re looking to save money, one of the worst mistakes you can make is going to the lot just to browse, that’s precisely how they get you into a new car, and all those savings go out the window!
This is a no-brainer for anyone buying a new car. No matter how pretty it looks from outside or how incredibly comfortable it seems at first glance. Take it for a test drive to know how it feels and how it drives. Not only do you want to test how it operates, but you want to be sure that the salesperson goes over the car with you and shows you where all the buttons are and where all the nuances of the vehicle are located. You may find that you don't like something about it that ends up being a dealbreaker, which although might be a bummer at first, you'll be glad to know that you didn't spend money on something that you weren't in love with!
This is one of the most important things you can do when you’re buying a new car or signing any contract. Did the salesperson say that they’ll be taking $5,000 off the price because of the new inventory? Or maybe they offered you a year’s worth of free oil changes to help sweeten the deal and get you into the new car? No matter what they said, be sure to ask for it in writing. If it’s not in writing and you sign off on a new car, you’ll have little to stand on if they ever deny offering those things to you.