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Automakers Are Desperate To Sell You A Brand New 2018 Model

Industry News

That's right, a 2018 model year vehicle. What's going on?

Dealerships may be offering some great deals right now on remaining 2019 models before the 2020s arrive, but they are still stuck with leftover cars from 2018 as well. Needless to say, that’s a problem. According to Tyson Jominy, vice president of automotive data and analytics consulting for J.D. Power, a total of 3.5 percent of sales last month were 2018 models. Of the 1.4 million new vehicles sold that month, about 49,000 were 2018 models.

Compared to July 2018, exactly one year ago, the percentage of sales made up of new 2017 models was 2.5 percent. Jominy noted last month’s results were the highest percentage of "year-old models on the ground in the past 15 years.” Why isn’t this good for dealerships? Jominy points out that automakers are spending around $1,100 more per car in incentives for 2018 cars than 2019s. This results in reduced profits.

Furthermore, Jominy estimates there could be up to another 30,000 2018 model year vehicles that have yet to be sold. And because of this troubling high number, dealerships are more likely to hold back on upcoming 2020 model year stock. There’s simply not enough room on dealership lots for up to three model years’ worth of vehicles. Ironically, dealerships were able to sell older new models off their lots faster in July 2008 during the Great Recession.

The overall big problem here is that automakers are producing more vehicles than dealerships can sell. Combined with high-quality used vehicles, specifically those coming off two or three-year leases and various other new vehicle sales incentives, it’s become a buyers’ market.

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Due to this overstock of old new vehicles, there are only two (two!) 2020 model year compact crossovers on dealership lots right now, the Chevrolet Equinox and GMC Terrain. Considering the compact crossover segment is one of the most popular today, this fact is quite surprising. So, what can be done about this? What can automakers and dealerships do?

Jominy believes production cuts are likely necessary. Could this also mean factory employee layoffs? It’s certainly possible.

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