Chrysler Finally Figures Out How to Rid Itself of Their 2006 Models
If you’re looking for a deal, this could be it.
By Chris Haak
I don’t live anywhere near Detroit (about 550 miles away), but I’ve heard the same stories all auto industry followers have over the past year or two of Chrysler overproducing vehicles to keep the factories running, even in the face of falling demand for their products (particularly the larger, more fuel-thirsty ones). Since they were unable to convince dealers, who still had a lot of 2006 vehicles on their lots, to take many of them, and still had a huge inventory problem, many of them were being parked in overflow parking lots at the airport in Detroit. There were acres upon acres of new 2007 Jeep Commanders, Dodge Durangos, and more.
Chrysler finally wised up a few months ago and discontinued this practice, after having at one time or another over 100,000 unsold, unordered new vehicles in the “sales bank.” Chrysler watchers (or Iacocca autobiography readers) may recall that this very thing – the sales bank – nearly bankrupted the company in the late 70s/early 80s. This time, all it did was cause a multi-billion dollar loss, the head sales & marketing guy (Joe Eberhardt) to lose his job, and lead to much of the pressure that lead Daimler to unload the Chrysler part of its name.
Meanwhile, most of the damage was done. The sales bank vehicles were already built, and there were billions of dollars in finished goods inventory that nobody wanted, sitting in the Detroit weather, with birds crapping on them and the sun, rain, wind, and snow depreciating them. Last I heard, most of them had been accepted by dealers. But, what about those previously mentioned 2006 models that a lot dealers still had? At this point, with many 2008 models hitting dealers, who wants to buy a “new” 2006 that was built almost two years ago, when 2007s are becoming heavily discounted?
Chrysler’s recent solution to this was to basically allow dealers to buy the leftovers themselves. You see, dealers who held 2006s and used them as loaners or test drivers for as little as one day could be considered used cars, transferred to the used car lot, and counted as a new car sale. So, aside from helping to clear out excess [old] new car inventory, this policy change also bumped up Chrysler’s May 2007 sales results. Under the program, a new 2006 model-year Dodge Ram pickup truck with a sticker price of $30,000 as a new vehicle could have its price slashed by as much as $11,500 next door on the used-car lot after being used (or at least labeled) as a demo for one day. Dealership personnel like this – a lot. Previously, the rule was that a vehicle had to be a loaner for 90 days before it could be considered a used car. What’s not clear is if the dealer is eating any percentage of the loss in value, but the assumption is that Chrysler is taking the pain when a vehicle priced at $30,000 suddenly becomes a $18,500 vehicle overnight.
But, regardless of where the pain ends up, if you’re in the market for a new Chrysler vehicle, particularly a vehicle where there might be new 2006 models of that vehicle still out there, it might be a really good time to go car shopping. Since these vehicles in question would still be legally new vehicles even after they went into demo service for one day, they should have the full factory warranty. According to the company, there were 9,800 2006 Chrysler Group vehicles in dealer inventory as of May 31, 2007.
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