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Business Resolution To Shipping Delays

533 Views 5 Replies 4 Participants Last post by  MJS73
Hi All. This random, but I'm always thinking about creative solutions to business problems. Feel free to correct my understanding of the below process.
  • My general understanding is that once a vehicle has been completed the factory invoices the dealer.
  • The dealer pays the factory and they release the car for transit to the dealer.
  • The vehicle gets to the dealer, I pay the dealer, and they transfer the car to me.
Why do dealers pay an invoice, only to then have that outlay sit on their books while cars sit idly in a lot somewhere or meader their way to the dealer? The incentives to get a car delivered are removed from the factory once they get paid. If dealers didn't pay the factory until that car hits their lot you'd better believe the factory would figure out these shipping delays right quick as the money would now be sitting idle on their books.

Same reason why you or I wouldn't pay the dealer until it's sitting on their lot.
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I believe it’s all factored into their floor plan. Years ago some dealers would refuse to sell a car at MSRP or a deal for that matter, thinking they could get big ADM’s. They ended up getting kicked in the rear. In the end they sold the car for a deal, but lost a ton of money paying chrysler to keep the car on the lot for 12 months. There is a story on here somewhere about that. Pretty sure once the next model year rolls around the dealer either has to pay for the car outright or they can choose to send it to the wholesale auction. Not 100% on that. I knew of a small mom and pop dealer near me that used to pay cash for their vehicles, and they carried roughly $3 million worth of inventory at any given time. Unfortunately they were one of the 789 that closed as a result of the 2008 financial crisis.
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