Autos

Car dealers struggle to sell 2018 new-car inventory to make room for 2020 cars

Key Points
  • Roughly 3.5% of all July 2019 car sales were 2018 model years, according to data from J.D. Power.
  • It's the highest percentage of new car sales of older models since at least 2005.
  • Automakers are now paying roughly $1,100 in incentives to move 2018 model year cars.
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As dealerships look to sell off cars from the 2019 model year to bring in 2020's shiny new models, they're running into a problem. They still have cars from 2018 clogging up their lots.

A full 3.5% of all July's new car sales were 2018 model years, according to Tyson Jominy, vice president of automotive data and analytics consulting for J.D. Power. That means roughly 49,000 of the 1.4 million new cars sold in the U.S. in July were last year's models.

It's the highest percentage of older models of new cars since 2005 when J.D. Power first started collecting data. The percentage of new 2017 models that sold last July was 2.5%, he said Monday.

Having a lot of 2018 models on the lot isn't good for business. As Jominy points out, automakers are spending about $1,100 more per car in incentives to move 2018 cars of their lots than 2019 models, cutting into profits for automakers.

"Consumers know what expired produce looks like" Jominy said in an interview. 

Jominy estimates that there may be another 30,000 cars from 2018 still waiting to be sold.

With so much 2018 inventory still on dealer lots, dealers are hesitant to stock new 2020 models, he said. For perspective, dealerships were able to move older models off their lots faster during the Great Recession than now, in July 2008 only .9% of all new car transactions were cars from 2007.

"This is the time of year to sell down model year 2019 cars and move to the 2020 models, but there are no 2020 models," said Jominy.

He's right, six car segments haven't rolled out their 2020 vehicles at all, most notably large light duty pickups and muscle cars according to J.D. Power data. The Chevy Equinox and GMC Terrain SUV are the only 2020 compact utility vehicles on dealer lots now. 

New car sales of 2018 models have been high all year, he said, which could be evidence of falling demand. 

"We may need to see production cuts, the industry isn't getting any bigger and hard choices might have to be made," he said.