A few years ago I was in the market for a mid-range Audi for one of the team at work.
I discussed prices with the sales representative with my focus being on a pre-owned car. The rep then explained that due to ‘bonus incentives’ paid on the purchase of a new vehicle, it was actually cheaper for me to buy a new car.
Think about that for a minute.
It’s cheaper to buy a new car than a pre-owned one.
Now forgive me … but isn’t there a flaw in the plan here? Are we not going to get flooded with pre-owned cars that nobody wants?
For a couple of years this system bobbed along nicely as more and more new cars were sold, everybody was getting a good deal and the car manufacturers were hitting their targets.
The upper echelons of the car industry were getting their bonuses and everybody was happy.
But …more and more second-hand cars were stacking up on the forecourts of these garages.
The senior guys then all started to retire with their bonuses intact.
New management came in and low and behold they realised …we’ve got a problem here. How can we increase the market value of all this second-hand stock?
“I know”…. somebody said.
“Why don’t we say there’s been a ‘component shortage’ and that parts are unavailable for new vehicles”.
“We can take a hit on new sales because the second-hand market will go through the roof”.
“Then we’ll increase the price of new cars and create a huge demand that creates waiting lists and price wars with cars selling over and above list price”.
The accountants signed off on the new strategy and we’ve all fallen for it.