Is this a common thing for a dealership to do?

My wife has a 2017 Honda CRV. She hates it. But we generally never get rid of a vehicle until it is paid for and she has a year to go. But the dealership she bought it from called and texted her several times over the last couple days asking her to sell it back to them. They know the vehicle from servicing it and are offering very good money. Seems like we should just give it to them and buy something else. I presume they are short of late model used inventory for some reason, but I also worry there is a catch. Ever heard of this?

We’ve gotten those (mailings in our case )in the past, so yeah it’s a dealer thing.   Used car market is absurd right now.  I’m hearing the average new car price is $39K and 7 year loans are now a thing as well.  

A local Honda dealer responded to my brother's facebook ad for his Accord.  They thought it was going to be some kind of scam, but he said it was totally legit.  They didn't try to sell him a car, didn't screw around on price, and basically bought it sight unseen.  It was listed on their website three days later.

Thanks for the input. She is going to drop by tomorrow and chat with them. 

Some dealers are desperate for used cars and are buying them from regular people. I would give them a call and see what they offer, you might be surprised. 

Price a new car and the availability of that new car before you offload your perfectly good (and valuable) CRV. 

One way or another it will only be around for another year. We may just pay cash for a Landrover LR4 since she really likes my LR3.

John Welsh (Moderate Supporter) said:

Price a new car and the availability of that new car before you offload your perfectly good (and valuable) CRV. 

 

Most definitely this.  Dealer inventories are down, and they are getting top dollar for every car they sell.

This technique itself is a part of car sales 101, and has nothing to do with actual market supply fluctuations.

Curious, what does your wife hate about it?  (we just bought one)

Dan

As I’ve said before, my other hobby is economics and geopolitics.  Yawn.  Yeah I know.  So I assume, since I really haven’t studied the car market recently, that dealers are short on supply due to the C19 situation idling plants.  So we have plants idled, restaurants closed, airlines and hotels near idle, and yet somehow people are spending money like never before.  Tried to buy a house recently?  We seem to be in an upside down world where the fundamentals don’t make sense.  But they will make sense again soon enough.  We have several bubbles now.  If a car constitutes a significant portion of your portfolio (and my assumption is that it does since you’re making payments...not judging I’ve done the same myself) I’d keep it for now and drive it.  Look for something different when we’re inundated with cars.  Coming soon.  

Driven5 said:

This technique itself is a part of car sales 101, and has nothing to do with actual market supply fluctuations.

Usually, but at the moment used car supply is down and wholesale prices are very high. The wholesale books actually adjusted up for most vehicles last month. 

Loweguy5 (Forum Supporter) said:

Sometimes a thing is just as simple as it appears.  Don't overthink it kids.

If the dealer wants the car and you're happy with the offer then sell it.

Gave you a like on that because many times in economics it does pay to be lazy about thinking.  

“NOBODY can forecast anything one week out, one month out, one year out or twenty years out.   NOBODY has any clue on future of inflation, the future of oil prices, the future of consumption, production,  war, peace, famine, pandemics....  Once you start modeling out a million variables in a recursive model that has feedback loops and variable weights on interconnections it becomes a combinatorial explosion that overwhelms all supercomputers.”  Quoted from a commenter on WSJ last week.  Truer words have never been typed.

i digress.  Back to cars

It's weird that people are talking about dealerships being in short supply, because locally the dealership lots are packed, from what I'm told.  Nobody's buying anything so the lots are full of unsold cars.

It may be that they have a customer lined up that wants a vehicle exactly like yours. They might be able to sell it as a "Certified" car and make a profit on it. As stated above, if you were already thinking about getting rid of it take the deal and move on. 

This is common.  Dealers are always looking for good, slightly used cars to put on their lot.

There is a catch.  Let's say they contact you and say "oh my heavens, we need used cars just like yours... we'll give you $25k for it."  Then you get there and it's nothing more than trying to make a sale.

They'll go through the normal steps of devaluing your trade.  That rock chip takes $5k off.  The coffee stain on the floor mat is another $2k.  Meanwhile, you're getting sold on a new car, and here's our offer:  $900/mo on that new Accord you like... and buried in the fine print is 15% interest and they only actually offered $10k on the trade.

It is 100% just a way to get you in the door by making you feel important.  "They remembered me and our car is so valuable that they want it."  But actually, it's just another way to get people in the showroom.  They have a never-ending stream of cars from the auction, lease returns, good trade-ins.  They don't need your car.  They need sales.

This is no different than a coupon for a free Coke at Wendy's.  They know that just getting you in the door means you'll almost certainly buy something and all they're doing is giving you three cents worth of sugar and water.

Bottom line.  Dealers WILL NOT lose money on a deal.  Period.  It doesn't matter what the offer is, they will not enter into an agreement on a sale or purchase if they are not making money.  If they give you a big sum of money on your trade, you're paying for the difference on whatever deal they strike for the new car.  End of story.  They are not altruistic, benevolent entities that give out free money.  They are shrewd business with highly-trained money sense.

It's like those ads on the radio:  "We'll pay off your trade no matter HOW much you owe!"  No.  They won't.  You will, and it will be reflected in the financing.

Pete. (l33t FS) said:

It's weird that people are talking about dealerships being in short supply, because locally the dealership lots are packed, from what I'm told.  Nobody's buying anything so the lots are full of unsold cars.

 

 

Not here, the Chevrolet store up the road has 38 new in stock, usually has 150 or more. Ford dealer has 1 F-250, usually has 100. That Ford store has 165 in stock according to the website, usually has 500....

Curtis73 (Forum Supporter) said:

It is 100% just a way to get you in the door by making you feel important.  "They remembered me and our car is so valuable that they want it."  But actually, it's just another way to get people in the showroom.  They have a never-ending stream of cars from the auction, lease returns, good trade-ins.  They don't need your car.  They need sales

This.  They'd love to buy your used car -- when you trade it in on buying a new one. 

We get these kinds of things in the mail all the time and every time I read it I have to laugh.  Have they SEEN my wife's car? :)

Steve_Jones said:

Pete. (l33t FS) said:

It's weird that people are talking about dealerships being in short supply, because locally the dealership lots are packed, from what I'm told.  Nobody's buying anything so the lots are full of unsold cars.

 

 

Not here, the Chevrolet store up the road has 38 new in stock, usually has 150 or more. Ford dealer has 1 F-250, usually has 100. That Ford store has 165 in stock according to the website, usually has 500....

Not really the whole story.  Supply has all but stopped, but demand is way down.  People aren't buying new cars.  In a normal, non-covid time, those 100 F250s would be gone in three months and replaced with another 100.  Instead it has taken them 7 months to move them and there aren't any to take their place.

I still get them from the Mitsubishi dealer, and that's for an 04 Ralliart wagon that I've been driving for 11 years.

In normal times, it's totally just a ploy to get you in the door so they can sell you a car. As far as my 16-year-old ralliart, I'm sure it still is. When I'm ready to sell it, the tech down the street that works at the Mitsubishi dealer is first in line. He wants it, bad.

I've read multiple articles about a used car shortage, so I believe that it's currently true.

Any deal that is offered by a dealer is not a deal.  It's a gimmick.  They need to make X dollars a week to pay the bills.  Therefore they have a base amount of money they must make.

I remember about 20 years ago, I was looking for a truck and I had budgeted $10k.  The local Ford dealer advertised new F150s for $18k.  I figured I'd take a look.  Maybe put $10k down and finance the remaining $8k.  I test drove a blue one with a big SALE tag in the window for $18,420 or something.  Told them to look at my Impala SS as a trade and said I would be paying cash.

The offer they came up with was an out-the-door cost of $24k and change.  They had offered me (get this) $850 for my Impala.  The $18,420 of course had destination fees, prep fees, blue paint fees, CA certification fees... blah blah.

So an $18k truck after my trade was going to cost $24k.... AND they would have turned around and put my Impala on the used lot and sold it for about $10k.

There is no such thing as a sale at a dealer.

I recall when I worked at a Chevy/Buick/Honda dealer, we had all kinds of radio ads.  Every time a new ad went out that said 0% financing, or New Civics for $1000 under invoice, we would get tons of people in there mentioning the ad.  Never once in my three years there did anyone ever bring up the content of the advertising.  Never.  Not a single time.  No one said "what about the $1000 under invoice?" or "I thought you said 0% financing?"  Even if they did, the answer could always be "We did have a few Civics at that pricing, but they're gone" or "only for people with perfect credit."  Bait and switch is illegal, but A) there is no agency that can effectively enforce it, and B) it is the ultimate way to get you in the doors.

Sales, flyers, and radio ads get you in the door.  Period.  You'll still end up giving the dealer at least as much money on a deal as any other day of the week.

In reply to Curtis73 (Forum Supporter) :

Not in the Baltimore market, dealers are having record months. It's very strange. Dealers are selling more this August than they did last August. When I bought a 4runner a few months ago, they had 7 in stock at 4pm Friday, all sold by close of Saturday. Dealers here are buying cars from out of State dealers and shipping them in. That Ford dealer with the F-250 issue bought 50 of them from a Ford dealer near you and brought them down in August. They're all gone. 

Used auction prices are crazy high, dealers here are buying off the street, straight deals, not expecting you to trade. A buddy just sold a 2019 Jetta to the dealer he bought it from in Feb for $21,800. They sold it to him new for $24,350. It was on the lot for 2 days, sold. The new buyer had to pay close to what he paid for it new.

Floating Doc (Forum Supporter) said:

I still get them from the Mitsubishi dealer, and that's for an 04 Ralliart wagon that I've been driving for 11 years.

In normal times, it's totally just a ploy to get you in the door so they can sell you a car. As far as my 16-year-old ralliart, I'm sure it still is. When I'm ready to sell it, the tech down the street that works at the Mitsubishi dealer is first in line. He wants it, bad.

I've read multiple articles about a used car shortage, so I believe that it's currently true.

 

There is no used car shortage... at least not on the east coast.  I can think of several dealer-only auctions that have opened up to the public because they are bursting at the seams.  Dealers are auctioning off their used inventory to stay afloat because people aren't buying cars.  They have to make a certain cash flow.  In normal times, they establish that metric with profits on vehicle sales.  Fewer people are buying, so they gotta make money.  The used cars might look like their short on the dealer lots, but they have just been shifted to wholesale to remove a liability and try to generate cash.

The other upside to that for dealers is that they have artificially generated a shift in the supply/demand.  This isn't their first rodeo.

Covid might have shifted their strategy, but they cannot stop making profit.  I'm not saying that as in "they're greedy jerks,"  I'm saying that they must make a profit or they close.

A 401 CJ said:

If a car constitutes a significant portion of your portfolio (and my assumption is that it does since you’re making payments...) 

That's a fairly bold assumption. The probability of any half-decent portfolio beating 0% over the next 5 years is pretty darn high. Many people see value in taking free money whenever you can get it.

.

Steve_Jones said:

Driven5 said:

This technique itself is a part of car sales 101, and has nothing to do with actual market supply fluctuations.

Usually, but at the moment used car supply is down and wholesale prices are very high. The wholesale books actually adjusted up for most vehicles last month. 

Which ignores the other half of the equation: The sale price of what it gest traded in on is up too...As well as private party values. It's all just a numbers shell game.

Long story short: Don't let this be the reason you walk through the door, but don't let it stop you if you're ready to walk through the door anyway. While you may be able to get a good deal now, another good deal will always be available later.

Curtis73 (Forum Supporter) said:

Floating Doc (Forum Supporter) said:

I still get them from the Mitsubishi dealer, and that's for an 04 Ralliart wagon that I've been driving for 11 years.

In normal times, it's totally just a ploy to get you in the door so they can sell you a car. As far as my 16-year-old ralliart, I'm sure it still is. When I'm ready to sell it, the tech down the street that works at the Mitsubishi dealer is first in line. He wants it, bad.

I've read multiple articles about a used car shortage, so I believe that it's currently true.

 

There is no used car shortage...

And didn't Hertz just put a huge chunk of their fleet on the block?  Or was that just the Z06's?