Car dealers are feeling the pinch due to unsold inventory. This means now is the best time to buy.
Before 2020, it was rare for a new car to sit for more than 200 days. Now, with car supply returning to pre-coronavirus levels and rising prices, cars are sitting idle for 500, 600, or even 700 days.
As a dealer trainer for various brands and dealer groups, I've seen up close the problems that overstocking causes, and it's not pretty.
That's a big change from just a few years ago, when many dealers were taking advantage of the chip shortage (and resulting vehicle shortage) to charge up to $15,000 above list price.
The tables have turned and no automaker is exempt. Ford, Honda, Kia, Chevrolet, and even Ferrari. Name a brand and you'll find that dealers have vehicles from 2022, 2023, and even 2024.
This will be a problem when the 2025 model arrives.
As a dealer trainer for various brands and dealer groups, I've seen up close the problems that overstocking causes, and it's not pretty.
Car dealers buy vehicles on a floor plan, essentially a revolving line of credit. No interest for the first 60-90 days. Ideally, you should sell within that period. Otherwise, the rates will be quite high, and when your inventory totals into the hundreds of thousands or millions of dollars, it all adds up quickly.
Dealers are highly motivated to eliminate these mobile money holes from their books. They offer incentives (or “spiffs”) to their sales teams to get them to sell their products. The salesperson will then offer the potential buyer a hefty price, anywhere from $500 to $1,000.
If that doesn't work, dealers will often simply pay off the car to alleviate the debt. In many cases, dealer presidents will keep unsold cars for several years, then sell them at auction for a fraction of the price or donate them to charity.
In some cases, taking a loss may be the wisest business decision. However, when it comes to 10 or 20 losses, it's a different story.
Alternatively, dealers may use such vehicles as demonstration vehicles or as loaner vehicles for their service departments. However, even if you choose this option, you will still be burdened by higher premiums.
So what does this mean for you? In short: huge savings.
Remember: Dealers are very motivated to sell their inventory. Always ask for trades. Loyalty or Conquest discounts can range from $500 to $2,500 depending on the price of the vehicle. Even the most sought-after models can be purchased for less than the manufacturer's suggested retail price, so look for them. And don't be afraid to drive out of state to buy. Doing so could potentially save you thousands of dollars.
If you're not picky, look for an older car in a less popular color, trim, or model year. Alternatively, consider renting a demo car or service.
It's a buyer's market, so feel free to negotiate. It also includes dealer fees, which are also not set in stone.
