Chrysler shifts '06 vehicles to used lots

To sell last year's new models, dealers are told to "use" vehicles for at least a day, then discount them.

By Josee Valcourt The Detroit News

Article Last Updated: 06/19/2007 10:27:47 PM MDT

Detroit - In a last-ditch effort to unload 2006 cars and trucks, Chrysler allowed its dealers to designate the new vehicles as "loaners" for as little as one day before selling them as used for steep discounts.

The unusual sales tactic came at the end of May as the Auburn Hills-based division of DaimlerChrysler AG was trying to finish the month on a strong note.

Chrysler, Dodge and Jeep dealers can use new vehicles as loaners for test-drives or for customers who need a car while theirs is in for servicing.

In the past, dealers have had to use a vehicle as a loaner for three months before selling it as used. Slicing that requirement to one day allowed Chrysler to count the vehicles as retail sales while dealers were able to move the outdated cars and trucks out of their new car lots, where they might dampen interest in newer models.

The program, outlined to dealers in a memo obtained by The Detroit News, offers a glimpse into the lengths Chrysler and other automakers will go to sell aging inventory in a competitive market.

Chrysler overbuilt 2006 model year vehicles last year rather than cut production. The excess vehicles were a major source of friction between Chrysler and its dealers, who balked at ordering extra inventory they feared they could not sell.

Chrysler used huge discounts to get rid of most of the excess 2006 models late last year and continuing this year. The loaner program provided a way to get rid of some of the last models languishing on dealer lots.

"It's a good way to dispose of some things that we needed to get rid of," said Ken Zangara of Zangara Dodge in Albuquerque, N.M.

Chrysler offered dealers $2,000 on top of existing discounts to encourage dealers to use the loaner program.

Zangara moved three 2006 Dodge Ram pickups that had been sitting on his new car lot for about nine months into the loaner program. The pickups, each valued at about $33,000, were used as loaner trucks for one day last month before they were transferred to the retailer's used-car business and tacked with a $26,000 invoice.

"It was like a no-brainer," Zangara said.