Every year, each manufacturer puts out a whole new line of automobiles. These new cars get sent to the dealers, who are tasked with selling them. When these cars first arrive, they have all the new features that car buyers want. It may seem like these cars would sell themselves, but members of the Idaho Auto Dealers’ Association go to great efforts to sell these cars. The longer these new cars go without being sold, the more it hurts the dealership. There are several reasons that it’s better for the dealership to sell a car sooner rather than later.
The model year of a car is only considered new for a year, so once a year has passed, it will get more difficult to sell. New cars are more expensive than used one, so if a buyer is going to pay the money for a new vehicle, they’re going to want the most recent model year. Once the next year’s models have arrived, the older “new” cars are going to have to be marked down.
The problem with a new car sitting on the lot for too long is that as the asking price goes down, the amount the dealer paid for the car does not. The invoice price is the amount that the dealer must pay to the manufacturer. In order for the dealer to actually make money, they’ll have to sell the car for more than the invoice price. However, if a car isn’t getting sold, the dealer may resort to selling it at invoice price just to avoid losing money.
Another problem with new cars going unsold is that many dealers use floor plan financing. A floor plan is a type of loan where vehicles for sale are used as collateral to borrow more money. Once the vehicle gets sold, the dealer repays the loan to the lender. The longer the vehicle sits on the lot without getting sold, the more money the dealer is paying for financing.
This is why it isn’t uncommon to hear big sales from your local dealerships being advertised on the radio or television, sometimes offering vehicles at invoice prices in an attempt to “make room” for the newest line of vehicles. No dealership who belongs to the Idaho Auto Dealers’ Association wants to get stuck with old inventory. These sales, especially those right before the next year’s models are slated to arrive, are a great time to get a great deal on a new car, as long as you don’t mind not having the most recent model.