What Happens to Unsold Cars When New Models Are Released?
Have you ever wondered what happens to unsold cars that sit in inventory? Where do they go when it’s time to make room for the latest models? Of course, dealerships are not going to give away free cars, and they have their secrets that are not disclosed to the public.
Car and motorcycle dealerships are franchised entities, which means they purchase vehicles from manufacturers and sell them at a higher price to make a profit. Therefore, once a dealership buys those vehicles, they belong to them.
Huw Williams, a spokesperson for the Canadian Automobile Dealers Association (CADA), stated: “From the day the vehicles leave the factory, they are the property of the dealerships. If a dealership buys 500 vehicles from the manufacturer, it means they are responsible for those 500 vehicles.” They cannot return unsold vehicles to the manufacturer; instead, they must find ways to entice customers to buy them.
It’s not unusual for cars to be stored for several months before reaching customers.
Accordingly, there are a few options for dealerships when their vehicles do not sell:
- First, they can transport unsold vehicles to another market where those models may still be popular with customers. For example, a Toyota dealership in a city that has a surplus of pickup trucks can send them to a rural Toyota dealership where demand for that model is higher.
- Second, unsold vehicles can also be auctioned off, but dealerships will incur costs from the auction house. Additionally, they must accept a loss since vehicles will be sold at a discounted price.
- Third, dealerships can opt to lease these vehicles to customers whose cars are undergoing maintenance or repairs.
- The final option is to use discounts and promotions on “stale” inventory. According to dealerships, the longer a vehicle sits unsold, the harder it is to sell, so even at a loss, they must find ways to clear out their inventory. Dealerships will offer installment payment options or launch attractive promotional packages to entice buyers and quickly move unsold vehicles. This strategy is widely adopted by manufacturers and dealers due to its effectiveness.
How to Avoid Buying Unsold Cars
In reality, it is not uncommon for cars to be stored for several months before reaching customers. However, in some cases, there are dealerships or sales staff who intentionally deliver vehicles that have been in inventory for a long time. Typically, the duration of inventory can extend to several years, and if not well-maintained (left outside), they can suffer quality degradation due to weather and other factors. Thus, knowing how to identify unsold vehicles to avoid them and purchase new cars is a concern for many customers.
To determine whether a vehicle has been in inventory for an extended period, buyers can rely on certain information such as the VIN (Vehicle Identification Number) or the manufacturing year of the tires.
Tires contain many specifications similar to a “birth certificate.”
The VIN is typically printed in three locations: on the frame of the vehicle at the driver’s door, on the firewall of the engine compartment, and under the windshield on the driver’s side. The 10th character contains information about the production year. According to a standardized system among automakers, the alphabet starting from A (excluding the letters I, O, Q, U, or Z to avoid confusion with numbers) will be used to denote years from 2010 to 2030. From this, you can determine the production year of the vehicle you wish to purchase.
Similar to the VIN, tires also have numerous specifications akin to their “birth certificate.” On the tire sidewall, there is always a series of codes starting with the letters DOT and ending with four digits. However, to know the manufacturing date of a tire, you only need to pay attention to the four digits usually enclosed in an ellipse. These numbers indicate the date of manufacture.
