What happens to unsold cars?

This is one of the stories in our “I’ve Always Wondered” series, where we address all your questions about the business world, no matter how big or small. Have you ever thought about recycling? worth it? or how to store the brand pile up against name brand? see more from series Here.

Audience Shannon said:

I’ve always wondered what happens to cars that don’t sell.

Before this year’s car shortage, it was not uncommon to see endless queues of vehicles at dealerships, waiting to be sold.

Jeff Jackson, president and chief operating officer of G Automotive, which has dealerships in the Pacific Northwest, recalled that some places will fit as many cars as they can on their lots.

“Cars are parked like sardines, you can’t open the doors,” he said. “And you order your cars two or three months in advance so you can have new ones. Until this year it was a challenge.”

It turns out that cars last until they’re sold out, at least when it comes to new models.

“You just keep lowering the price until someone buys it,” Jackson explained.

Brian Moody, executive editor of AutoTrader, said that sometimes manufacturers will also add incentives to attract customers, such as $1,000 cash-back deals.

According to Jackson, some common reasons why a car might not sell can include factory disruptions – for example, luxury cars that lack a sunroof or navigation. In other cases, customers may not like the color of the car.

“Then sometimes, car companies make a lot of vehicles of a certain type,” Jackson said.

But used cars are a different beast, with dealerships keeping these vehicles for a limited period of time.

“Typically, a dealership would only want to keep a vehicle for about 60 days. The philosophy is that if you haven’t sold it in 60 days, you’re going to have trouble selling it, or it might not be the right car for you,” Jackson said. “During those 60 days, you’ll lower the price until you probably have a profit in it.”

He said that after those 60 days, dealers can participate in wholesale auctions – either virtual or in person – where other dealers can bid to buy that car.

“On the used car side, cars are usually sold just because they are in the wrong place. It is a matter of getting it to the right place,” he said.

Moody said that sometimes, if an old car is distressed enough, It can go to a salvage yard and be recycled.

“There is a lot of money to be made in cars. When you see a ruined car, chances are 80% of it is still usable,” Moody said. “Engines, tires — all that stuff.”

But this year every car has some buyer or the other. Global microchip shortages prompted major carmakers such as Jeep, Honda and Toyota to cut production, leading to a jump in prices. There is a high demand for both new and used vehicles, which companies have struggled to keep up with.

General Motors also announced that it would temporarily stop production at six North American factories due to shortages.

“Now you walk past a car dealership lot, and they’re mostly empty,” Jackson said.

However, there are signs that the used car market may be returning to normal. Sales are slowing down, while their prices are starting to drop to $2,000.

Part of the reason: Some people who own multiple cars are offloading them to cash in on higher prices, and dealers are offering lucrative offers to owners who might consider parting with their trusted vehicles.

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