Supply and demand are the two most cited forces in market pricing of new cars, wagons and trucks for consumers than anything else. However, in reality, the process of selling cars is far more complicated than simple economics. In many cases, there is so much operating cost built into the sale of a new car today that, if pulled out, the car price might actually be far less than what the market is currently paying.
Take, for example, the issue of unsold inventory. Many folks think that car dealerships sell cars that they bring in and continue to keep selling them until the car moves off the lot. Ergo, dealerships never quite seem to have leftover inventory, right? Well, yes and no. It’s not because all car dealerships are uber-sellers and great at what they do. In fact, it’s pretty much impossible for a dealership to turn over its entire inventory on a regular schedule; the local community sold to can’t afford to sustain such sales. Instead, unsold inventory gets moved to discounted fleet sales, fire sales, and, if nothing else works, to empty waiting lots.
Where Do They Go?
According to Vince Lewis, there are multiple and numerous lots all over the world near car manufacturer plants where models sit and collect dust, unable to be moved. It begs the question why one wouldn’t just sell the cars at a lower price. But here is where the laws of economics kick in again: if the market gets flooded with a bunch of new cars, the price per unit drops. Supply outpaces demand. So that works against the profit margin of car makers, which they won’t do. Instead, perfectly usable good new cars sit and age.
Why is this such an issue now? Mainly the economy in most countries. The 2009 recession worldwide didn’t do anybody any favors, and a tremendous number of working folks not only saw their pay become stagnant, many also realized pay cuts or lost jobs altogether. That contributes to a social slowdown and resistance to buying new cars because of a lack of discretionary funds. Compound this issue with personal credit freezes and more challenges to getting loans at the individual level through banks, and the entire market grinds to halt in terms of moving mass numbers of vehicles.
Haggling With Gusto
So when major news report rising car sales, such as according to the Wall Street Journal a recent 9 percent spike occurring in consumer sales in 2014, one has to also take into account how much is being paid to maintain the overall operations of car makers in addition to just making that car unit and profit margin. That gives a buyer a whole new perspective on how to pitch an offer for a new car. To make matters even more interesting, a car buyer who comes in with a down payment has even more leverage. And that downpayment is easy to product with even old junk cars through services like we buy cars, who pay cash for cars on any condition.
So if anyone had any misgivings about bargaining for a car price, the above should dismiss that concern altogether.
