Every model year, auto dealers who sell new vehicles (cars,trucks,suv’s, etc.) seem to have their lots absolutely full, (as do their competitors next door, down the street, many other places in town and all over the area.)
Where do all these new vehicles go? They can’t possibly sell them all before the newer cars arrive (or can they?) And as the auto dealers try to sell-off their inventory, all the auto makers are busy churning out more and more vehicles to fill less and less parking spaces at the dealerships. (Doesn’t something gotta’ give?!)
Do the auto dealers wholesale them if they can’t sell them?
What happens to all of those unsold vehicles?
They will only stock on models they expect that will sell well. These are usually mid-to-low range cars. Expensive cars like Mercedes, or other cars that are not popular are almost always manufactured at demand (which depending on model popularity and factory throughput, can take from 2-3 months up to a year).
Also, in cheap cars the auto dealer will have to choose some trim levels. Although the factory can combine any amount of available extras, the dealer has to predict which ones will be more popular (with respect to the target group) and will choose two or three trim levels. Note that this also doesn’t work with brands like Mercedes. The list of possible extras is so extensive, that every car has to be built to the taste of the individual buyer.
If the predictions of model popularity and trim levels are correct, then the dealer won’t have too many cars unsold. Then, when there is a new model coming, there will be a significant price drop in order to get rid of any remaining cars.
For example, the new (2005) Ford Mondeo is going to be produced very soon. As a result, they have dropped the price of the existing Mondeo more than 2000 euros.
IMHO, it is a very smart move to buy soon-to-be-retired models. We always want to buy the newest possible car, but I doubt that the new Mondeo will have something radically diferent from the old one (apart from exterior styling).
Now, some times all predictions will be teribly wrong. Since car dealers cannot return the cars they bought, the price drop will have to be much steeper and come much earlier. The car dealer is losing money in that case.
I remember when Honda never had “sales”. I think, it was up till the 80’s, but maybe I’m a little off (haha). Anyway, they always sold out the current model before they broke out the new model year.
Now I’m beginning to feel a little insecure about this. Please, somebody back me up. :dubious:
Peace,
mangeorge
This is very sound advice. Subaru did a minor cosmetic redesign on the '04 WRX. When I went shopping, the dealer had just received a shipment of '04 WRX’s while they still had '03s in stock. By choosing the '03, I saved $5500 (from MSRP).
The dealers sell essentially 100% of the cars they receive from the factory. And as fast an cars are sold, the factory pumps out more just like them. At year end things change slightly as new-year models come in to replace old-year models that go home with new owners.
The incessant advertising about special sales due to “overstock” is just that, advertising. People love a bargain, even a fake bargain. Tell 'em they’re 10% off this week for some reason and they’ll buy. Th eonly problem is next week the dealer needs a new reason to take 10% off so folks will buy that week.
According to this http://www.keepmedia.com/ShowItemDetails.do?itemID=460914&extID=10030&oliID=226, US consumers bought almost 1,500,000 new vehicles in just April of 2004, and projected 2004 annual sales of new vehicles is 16,4000,000. That’s a LOT of vehicles. BW, according to the US census, as of 1997 there were almost 26,000 new vehicle dealers in the US.
You couuld just as easily wonder about the rows and rows of cereal boxes at the grocery store. Where do all those boxes go? They can’t possibly selll that many boxes of cereal?? Yes they can. And do. Every week.
That is in itself a false premise. That presumes a 100% turnover every week. You are drawing a connectio between two things which are not directly related, sales and inventory. The number of cars, boxes of corn flakes, three prong wobbler widgets, etc. on the lot just means the customer may have a wider or lesser variety of choices available. The rate that items come in to stock and are sold is not apparent to an outside observer.
Of course nothing says the weekly turnover of cornflakes isn’t 500% but just seeing the number on the shelf doesn’t tell you that.
Car dealerships do seem to move a lot of cars around amongst themselves - I wanted a silver Grand Prix, not a white one, so mine came from Greenville, I think. They just smack it on the truck and send it to my dealership. So that does explain where some inventory goes - if the local buyers turn out not to want the trim level you picked, you can send them elsewhere. I’m curious, though - did my dealer buy that car and then sell it to me, or did he trade it for another car, or did some other magical thing happen? (Both Pontiac dealerships, owned by different people, obviously.)
A lot of larger dealers also have a lot out back you can’t see where they keep all the extra cars that won’t fit out on the front lot. If they sell 10 cars on the front lot one day, they probably take 10 cars out of the back lot and put them out front to fill the spaces the next. This keeps the front lots always looking full.
In John DeLorean’s On A Clear Day You Can See General Motors, he said that the car industry is very unusual in that they sell every single unit they make. Often, they have to offer rebates and no-interest loans to do it. In fact, sales have been so tight since mid-2000 that hardly anybody bought a car without a rebate and/or a loan deal.
All the cars get sold. Sometimes the dealer has to take a loss. A few years ago, a local dealer offered me a car that was more than a year old, but it had not yet been sold. That’s really unusual, but it happens. At model year change time, there are usually cars on the lot from both years. You can get a price break on the “old” new cars as Lazlo did, but check to make sure you get enough to cover a year’s depreciation (your new car will be a year old as soon as you take it off the lot.)
In general, expensive cars are just as popular as cheap cars. They just have a more affluent audience, so it may seem outside your reach (and mine, for that matter). Of course by “popularity” I don’t mean gross numbers, but related to the income groups their target audiences fall in to. In this case, a Mercedes is a very popular car, perhaps more so than the Focus.
For really, really rare cars, there’s a waiting list, but the can be cheap cars, too. When the new Beetle came out back in '98 or so, there was a long, long waiting list. Similarly when that little, ugly, hearse looking Chrysler (name escapes me right now, the Neon-based hearse-car), there were also waiting lists. These are two cheap cars!
Actually grocery stores often operate at 40+ inventory turns, I doubt that corn flakes are one of the weekly turnover items but the lifespan of much of a grocery stores inventory is measured in days. With the razor thin margins many grocery stores work under, being trapped with excess stock can be lethal.
Now major chains use alot of vendor managed inventory and lease shelf space to those vendors, making them far different animals. But betcher butt they don’t lease more shelf space than will hold product that consistently sell.
I bet you think inventory people just wander around with a scanner and scan stuff huh :D.
Advanced inventory/supply chain methods have very detailed and powerful tools that these guys know very well.
In a nutshell, If a dealer is averaging 100 cars a month, he might keep 110 on hand. If it takes him 2 weeks to get additional cars delivered to the lot he just constantly orders cars as needed to keep his stock level. This occurrs at several levels up the supply chain. The factory knows how much a week on average the dealers sell and builds cars at about that rate.
Search for info and articles on Production Master Planning. Its an aspect of manufacturing most people are painfully ignorant of, even on the floors of many factories.
No I DON’T think that “inventory people just wander around with a scanner and scan stuff huh :D.” !!!
I was just curious about this (as I always see car lots full of cars all year around) and I just wanted to ask a question.
I remember that, and stickers on cars that included ADM (additional dealer markup), and sales weasels that acted like the customer should be grateful that they were being given the opportunity to buy a car at above list. I don’t think they understood how much ill will that generated.
That was a joke, thus the smiley…sorry that I wasn’t more clear about it.
I don’t know the specifics of car dealerships but I do know detailed production and distribution planning. If you require any more in depth questions I can probably answer them.
I apologise drachillix, I guess I took things too seriously. I’ve guess that I’ve got to “loosen up” a bit and not be so darn oversensitive about things.