Can someone explain why loaner cars can be sold for less by dealers? I’m trying to understand the accounting aspect as my assumption is dealers buy the vehicles from the OEM for the same price as the rest of their inventory.
Do they mark down the cost of the loaners on their books and can therefore sell at a lower price while still showing a profit on the deal? If this is correct, how is the markdown determined? I do not understand the process.
If someone can generously break down “loaner vs. new” math from the dealership perspective I’d appreciate learning.
The simple explanation is that the automakers provide incentives to encourage a few demo and loaners. Technically dealerships don’t have to give you a loaner when your car is in for service. But 99.99% of customers who get new cars expect a loaner, so automakers want to make sure customers have a good experience with their brand.
The automakers will pony up funds to give motive for the dealerships to run the loaner fleet. Eventually the cars age out and the dealership will need to move them.
Savvy LH users who lease these “fart cars” get the benefit of the residual still being fairly healthy even though the car they’re leasing is effectively a used vehicle. And of course a subvented money factor and full qualification for rebates is also very attractive compared to a truly used vehicle.
Every brand, vehicle, and timing-situation is different. Unfortunately this information won’t be available to people unless they have a close relationship with the dealership since this knowledge is not the type of stuff you’ll get with a LH Super Supporter membership.
A bunch of those ultra-discounted EQBs that went through LH a few months ago took advantage of a relatively massive loaner spiff. EQBs today won’t see the same loaner incentive.
Another example, on the Escalade IQ, there were special regional loaner (GM calls it a courtesy transportation) incentives for certain parts of the US. But in California, the dealer couldn’t access those extra funds.
Last, some manufacturer loaners are not leasable. I tried to help someone lease a Subaru fart car a few months ago, and the dealer simply said they couldn’t lease the car. Maybe someone familiar with Subaru can correct me, if they are in fact leasable.
Loaners are usually new cars that have been sitting around awhile and a little tougher to sell. Thus being put into the loaner fleet.
Demos are typically driven by dealership execs, like the GM or owner. Usually better specs and higher MSRP.
I wouldn’t spend cycles trying to figure out what that % reduction is and all that. We don’t run the business and there are many factors that affect the bottom line. Think of the levers at play when you try to buy/lease a car in F&I. Now imagine even more behind the scenes, beyond F&I.
