Chrysler: Loan for a Day Then Sell Them as Used
June 20, 2007

Still haunted by last year’s bloated inventory of unsold vehicles, Chrysler is allowing its dealers to call leftover 2006 cars and trucks “loaners” and then sell them a day later, instead of the usual three months, at deep discounts.

The intent of the unusual sales tactic, which went into effect at the end of May as current incentives were about to expire and was revealed by the Detroit News this week, is two-fold:

· boost sales in soft months. The move may well have helped Chrysler achieve its unexpected sales increase of 4.3 percent in May;

· ditch leftover inventory from last year as Chrysler nears the time to unload the 2007 leftovers to make way for 2008 models.

Jesse Toprak, Edmunds.com’s executive director of industry analysis, said this “rearrangement of inventory” is intended to save dealers on finance costs to carry old vehicles and to clear them out so as not to cost dealers and manufacturers sales of newer models.

"Ideally, they do not want a 2006 new car next to a 2007 model-year new car," Toprak said. "That's going to potentially cannibalize your 2007 sales.”

And, in the next few months, 2008 models will be rolling into showrooms.

Typically, dealers use a loaner vehicle for test-drives and to provide customers with vehicles in for service with transportation for three months. They then sell the loaner at a discount as a used vehicle.

For consumers, it means some great deals. In an example cited by the Detroit Free Press today based on information from dealers, a 2006 model-year Dodge Durango SUV with a sticker price of $30,000 as a new vehicle could be discounted by as much as $11,500 on the used-car lot after being used as a demo for a day.

Chrysler’s most recent financial crisis came to light when it became obvious that the automaker had vastly overbuilt 2006 model-year vehicles late last year rather then cut production. Chrysler was and still is forced to use huge discounts to move the excess metal. Ultimately, Chrysler was also forced to trim back production to prevent inventories of unsold vehicles from ballooning even further.

Posted by Michelle Krebs at 7:20 AM under Analysis , Chrysler , News | Comments (0) | digg this | Seed Newsvine