Do You Have to Let It Linger? Dealers Struggle With Old Stock During a Season of Renewal
Spring might be a time of renewal, but fall is generally when old gives way to new on dealer lots. Not necessarily, though. If the “new” 2017 Fiat 124 Spider I recently spotted against a backdrop of 2018 Ram 1500s on my local FCA lot is any indicator, some brands have a tough time turning over a new leaf, so to speak. (Fiat’s problem is especially grim compared to other brands.)
Bloated inventories, scattered new model introductions, and a fickle buying public have made “new car season” less apparent than ever, and the problem seems to be growing worse.
According to Bloomberg, data from Edmunds shows a rising trend of old vehicles lingering on lots past their model year, creating a problem for those tasked with selling them.
In the fourth quarter of 2017, just 46 percent of new cars sold in the U.S. were new 2018 models, compared to 73 percent in the same quarter, 2007. Data from the first quarter of 2018 showed roughly 20 percent of new car sales involved a 2017 or 2016 model.
Though many automakers, including GM, have made efforts to lower their bulging inventories (Kelley Blue Book’s last check showed the industry at 66 days’ supply, down 3 days from last August), the industry-wide average remains higher than in the years following the recession, when a rising tide of American buying public stormed anxious dealerships in search of vehicles. New vehicle sales have plateaued, with analysts projecting fewer sales in the years to come. Still, projections are hit and miss. While Edmunds and Cox Automotive predict a better August than last year, we won’t know if that truly was the case until sales figures roll in later today.
Edmunds analyst Ivan Drury feels automakers haven’t yet received the message. “I don’t think they understand the gravity of the situation,” he said. “This is becoming a chronic, real issue.”
Dealers take a hit when left with old stock at model year turnaround time, especially if the newer vehicle is a refreshed model. The old vehicle eats up a spot on a lot that could be occupied by a more desirable vehicle that would sell in less time, and at a higher price. Dispatching old stock traditionally means big, big incentives. And that price tag lures eyes away from the newer, often unchanged models next to it.
Last December, roughly 20 percent of Nissan sales involved a 2018 model. The automaker resorted to throwing incentives at dealer sales staff in a bid to move the old metal. Interestingly, around the same time, Nissan declared an end to the long-held practice of chasing sales targets, later slashing incentives on its vehicles in an effort to boost profitability.
Across the industry, Audi and Subaru keep the trimmest inventories, leading to less model year overlap in late fall. Elsewhere, there’s the potential for big savings as desperate sales staff get ready to play Let’s Make a Deal. This author’s father once made a $4k profit trading in a two-year-old Jeep Patriot on a new, higher-trim model.
You have to wonder what that ’17 Spider ultimately sells for…