Car Dealership Question

[Wheel-Nut]

I've often wondered, while sitting in traffic and looking at the car dealership lots. Do the dealers buy the vehicles outright from the automakers or do they sell them on some kind of consignment deal?

[spinner26]

I'll add one more if okay.

What happens to all the unsold vehicles at years end or even a couple years later?

[Wabbit]

Typically, they deal with a third-party financial company that fronts them the money for the vehicle inventory. When they sell you the car, they pay their finance company. Buying like this can also get them better pricing since the finance company can arrange larger buys. (Not all dealers/Manufactures do this).

[chop456]

They make money by selling babies' souls to the devil.

[Wheel-Nut]

third-party financial company that fronts them the money

such as GMAC, Toyota Finance, Ford Credit or something similar?

[Wabbit]

such as GMAC, Toyota Finance, Ford Credit or something similar?

Similar, yes.

[Spicoli]

They ship all the 2-3 year old models that didn't sell to Wisconsin. :gomer:

[datachicane]

What happens to all the unsold vehicles at years end or even a couple years later?

They all sell.
Folks have this inexplicable belief that they'll get a better deal on the previous year's model, so they're actually in some demand. Not infrequently, those customers end up paying more than they could have for the current model. I've seen the same thing happen with particularly popular used vehicles vs. new, as well...

Those 'model year close-outs' are a total cash cow.
Like much of life, perception==reality.

[SteveH]

Actually, I did get a very good deal on a previous year's model. The car was executive driven by the manufacturer then sent to a dealer and it had not sold when the new model year came out. The manufacturer bought it back and then placed their inventory of last year's models on an internet site only accessible by their dealers. The local dealer I bought it from bought it far under what it would have sold at originally. Since I use this car for business and rack up high mileage, the fact that it was technically 1 year old with 3,750 miles on it didn't bother me at all (still had a new car warranty). In fact, I've already spoken to the dealer about doing the same thing this fall. He told me to stop by in Sept. and tell him what I want (even color) and he'd start searching.

[G.]

Really short answer to a long question: Dealer finances 3rd party, gets car for INVOICE - Holdback. Holdback varies between brands, some vary it for huge volume dealers, some are flat for all dealers. Holdback ranges around 4%.

Dealer gets new car, sells in 3 days at invoice, they get all of the holdback as profit$. Sell at over invoice = more $$. They pay 3rd party for 3 day's interest on their loan.

Car sits for 6 months, they lose money, unless $ucker pays too much for it. There's games to play there, as well. (Buy car outright? Then no interest.)

Used to have a GREAT 'splaination at Edmunds.com

Quick search there, i couldn't find it, but I bet it's still there.

Dealers DO NOT sell cars at a loss. Minimize their profit$, maximize your saving$.

[G.]

Actually, I did get a very good deal on a previous year's model. The car was executive driven by the manufacturer then sent to a dealer and it had not sold when the new model year came out. The manufacturer bought it back and then placed their inventory of last year's models on an internet site only accessible by their dealers. The local dealer I bought it from bought it far under what it would have sold at originally. Since I use this car for business and rack up high mileage, the fact that it was technically 1 year old with 3,750 miles on it didn't bother me at all (still had a new car warranty). In fact, I've already spoken to the dealer about doing the same thing this fall. He told me to stop by in Sept. and tell him what I want (even color) and he'd start searching.last prev. year car I bought was new (24 miles, not 24K). I got it for about $1200 less that I expected to pay with mega research. I doubt they lost money, but I was pleasantly surprised.

[datachicane]

Like I said, perception==reality.
If you think you got a great deal, then you did.

One of the weirdest constants I noticed during my years in various sales-related occupations (before my current IT incarnation), was that the customers who worked the hardest and were most concerned about getting absolutely the best deal possible were, almost invariably, the least happy with their purchase several months later, regardless of how great a price they might have negotiated. Now that I'm on the other side of that relationship myself, I find there's something to be said for getting a 'good enough' deal without sweating what the next guy might buy it for.

If it's the right choice for you (this means you gotta be able to afford it, too), you won't remember precisely what you paid for it a year down the road. If it's the wrong choice, you'll still be pi$$ed regardless of what kind of smoking deal you were able to pull off.

[oddlycalm]

Dealer inventory financing is called "flooring" and it's often through the mfg. The bottom line is that the cars are costing the dealer money every minute they are sitting there.

As you might anticipate there are some subtle complexities to flooring that pit the mfg. against some very adept dealers that are unencumbered by the curse of integrity.... :D

oc

[Wabbit]

Dealer inventory financing is called "flooring" and it's often through the mfg. The bottom line is that the cars are costing the dealer money every minute they are sitting there.

oc

That's why the dealer always pushes what is on the lot rather then trades or special orders. It's not just car dealers, but a lot of businesses that buy/sell high ticket items. That's one of the reasons I got the car I did in October. It was cheaper for them to discount what was on the lot then it was for them to order one.

[Indy]

Having had family connections to the car business, I can tell you that you can get an especially good deal, but that it is more unusual than people think. All the information available today makes it more possible for people without connections, however. If you are looking to buy a VW in Indy, PM me, I have a friend...

Also, as a salesman (not of cars), I agree that a "good deal" is less about the price and more about satisfaction with the product. In my business, I can point you to many supposed deals that will leave you feeling cheated in the end. You get what you pay for 99% of the time.

[devilmaster]

selling babies' souls to the devil.

*urp*
They taste like chicken.