Some friends and I were having this discussion the other night, and don’t know if we ever came to the right answer.
What happens to brand new cars that just never sell? For instance, if a car dealer had three hundred 2001 Dodge Durangos when they first came out, and only sold 295, would that dealer still have five brand new three and a half year old cars on his lot?
The best we could come up with are: those cars are sold to other dealers, used car dealers, or at auctions; they’re sold from dealer to dealer until someone can sell them; the original dealer just keeps dropping the price until they’re sold; at some point the price gets so low that it makes more financial sense to scrap the car rather than sell it at such a huge loss.
One thing you have to keep in mind is that the dealerships don’t actually buy the cars from the car makers until the are sold. The pay some nominal fee to have them on their lots. So I would imagine the car maker would decide what to do with the left over cars.
They don’t ever get to the scrap stage. I remember reading in Lee Iacocca’s book that when he came to Chrysler, the company was building cars based on capacity, rather than orders or even sales projections. That meant they had literally thousands of cars to get rid of, every month.
Rental car companies and government and corporate fleets are a huge market. The auto manufacturers also offer incentives to their employees and even their suppliers, based on what models they have a surplus of. When my company had Ford as a client in the mid 1980s, Ford was offering us cars at the cost it was giving its own employees. One way or another, they all get sold, even that lime green pickup that’s been on the dealer’s lot for months.