Usually the cars that sit on a dealer’s lot for that long are relatively rare. What I mean by that, is that there aren’t many other cars with the exact trim level, or equipment, or color available. In my career, there were “new” cars I sold that were over a year old, and our dealership made a healthy profit on them simply because they were the only car in the country that was specced in a way that the buyer wanted. I worked at a dealership in Maryland that held onto cars for way too long, and frequently we’d eventually sell them to folks in California, or New York (or anywhere in between) that were looking for exactly that car, and we had it.

In most dealerships cars really can’t go “unsold,” because that would upset shareholders (remember, the big public dealerships need to “turn” cars to keep their investors happy). However, in smaller, more “mom and pop” dealerships, “unsold” cars are more of a frequent occurrence.

What happens to unsold new cars?

Sold to the consumer

Selling a relatively rare car to a consumer is the first “path” an unsold new car can go down. If you’re looking to buy a car, consider letting me help. There are of course many other paths unsold new cars can travel down as well.

Service loaner or staff demo

At some dealerships older new cars are added to the service loaner fleet (the vehicles the dealership loans out to their service customers to drive while the car they own is being worked on) or as staff demos (cars the dealership staff can drive as a perk for working there). These cars are then converted to pre-owned inventory and marked down for sale.

If you’re looking to get a good deal on a new car, your best bet may be to not buy a new car at all — a service loaner or staff demo are great cars (well maintained) and lightly driven (no on is taking them on long roadtrips), and make great options for budget conscious car buyers who still want something “new.”

What happens if the car still doesn’t sell after being moved to “pre-owned?” This is where we enter the world of auctions. Automobile auctions are a foreign world to most, and with good reason, they’re restricted to registered dealers only, however they represent a multi-billion dollar industry with thousands of transactions occurring each day.

Auctions

Dealers will frequently send cars to auction that they haven’t been able to sell them at their dealership. This is about as close to “unsold” as a car can get. Sending a car to auction typically means taking a loss, but it’s more valuable for the dealer to take a small loss at the auction than it is to keep the carrying cost of the car on their lot. It’s a trade off, and one that a lot of dealers make.

Generally speaking, manufacturers (frequently referred to as the original equipment manufacturer, OEM) work diligently to stock their dealerships with the right mix of vehicles. By stocking the dealership with the right mix of cars, OEMs are able to support their dealer partners in turning vehicles quickly. But, when that mix goes awry, and dealers truly can’t get a car off their lot, they’ll send it to the auction.

There are two types of auctions, open auctions and closed auctions. An open auction is open to any authorized dealer personnel, regardless of brand represented or whether being a new or used car dealership. A closed auction is restricted to dealerships that are franchised to represent that particular brand.

As an example, Honda may hold several auctions each month that are closed to Honda dealers only. This is done for the express purpose of selling off Honda lease returns and factory executive demos while maintaining a higher per car value because Honda dealers are willing to pay a higher price for nice pre-owned Hondas for their lot.

Cars traded into a dealership that the dealer doesn’t want to keep for their lot often are disposed of at open auctions, where any dealer is invited to buy as many or as few cars as they may like. These types of auctions are where many used car dealerships buy the inventory for their lots, and where many “unsold” cars eventually end up.

There are a few primary marketplaces for cars, the largest being Manheim, owned by Cox Automotive. If a car is “unsold” odds are high it ends up at a regional Manheim auction, and odds are even higher that some dealership somewhere buys it.

If you’re interested in learning more about why there is no such thing as an unsold car, let us know in the comment section below. I’d be more than happy to explain how dealerships make money by buying cars at the auction.

No car ever goes unsold

So there you have it, no car actually ever goes unsold. Whether it be a dealer who holds onto a car until the right buyer comes along (even if that takes over a year), or a new car that gets converted into a used car, or if a car goes to the auction, every car eventually finds a home.

In my 42 years in the car business I never once saw a car, no matter how ugly, poor performing, or otherwise, not end up with a buyer. Something tells me that trend will continue for the next 42 years too!