The Fate of Unsold RVs: An Inside Look

As a seasoned professional in the RV business, spanning from 1986 to 2010 with roles as a salesperson, sales manager, and general manager, I have seen a lot. In my days working with family-owned organizations, every unit sold, and surprisingly, sometimes even three or four-year-old “new” motorhomes sat on the lots. Understanding the nuances of inventory management and the financial implications involved, this article delves into the fate of these unsold units.

Understanding the RV Inventory Landscape

RV dealerships have their unique challenges, particularly when it comes to managing inventory. The lifecycle of an RV unit is significant, and the opportunity cost of keeping an unsold RV can be substantial. Unlike cars or other consumer goods, an RV remains ‘new’ for a much longer period, making it harder to devalue quickly. Dealers face multiple challenges:

Floorplan Interest: When a dealer takes a unit on consignment, they pay floorplan interest, which is a loan from the manufacturer to finance the RV until it is sold. This interest accumulates over time, increasing the cost to the dealership. Revenue Loss: Unsold RVs consume valuable showroom space, which could be occupied by new models and thus, new revenue. This lost revenue is a direct financial impact. Opportunity Cost: The dealership has the potential to earn a profit on a new model every time a space is filled. Keeping an unsold RV means missing out on these sales.

The Financial Burden of Unsold Cars

When a salesperson like myself started, the mentality was simple: sell everything. However, the reality is far more complex. Once an unsold unit spends a significant amount of time on the lot, it becomes increasingly challenging to recoup the investment. The residual value of a motorhome diminishes gradually over time, but in the meantime, the dealer still incurs costs.

For example, the dealer has to pay for storage, insurance, and maintenance. These costs accumulate, and the moment the unit is sold, it will be at a price lower than its original cost. This transaction is the only way the unit becomes a financial loss for the dealership. Therefore, dealership staff and managers are always on the lookout for customers willing to take advantage of current market conditions for a great deal.

Customer Perception and Inventory Shifting

Customers often perceive an unsold RV as a great opportunity, especially when it comes to deals. They may find themselves getting a seemingly attractive price, which, in reality, mirrors the value of the RV when it was “new.” However, what’s not so clear is the underlying financial struggles of the dealership. The market is driven by supply and demand, and when there are more new units than customers willing to buy them, swift sales become a necessity.

Dealers often use these unsold units as a “back-of-the-book” offer, signaling to customers that they can get a deal beyond regular promotions. This strategy works for two reasons: first, it attracts price-sensitive buyers looking for bulk savings, and second, it subtly puts pressure on buyers to make a decision, ensuring the unit is sold before the value drops further.

Conclusion

The fate of unsold RVs is a delicate balance of financial management and customer satisfaction. Dealerships face a continuous challenge to maintain a healthy inventory turnover while ensuring they offer good value to their customers. As we look into the future, the evolution of technology and changes in consumer behavior may further impact how dealers manage their inventories and present unsold RVs to the market.