Where are all those unsold vehicles?
When the 2016 models come out, the dealership marks down the 2015 model and then it sells pretty fast.  The process doesn't take that long in the car market because the 2015 models are just as good as the 2016 so if they are just a little cheaper, they will sell quickly.  If you want a 2008 Audi that has never sold, you are going to be looking for a long time. The same thing happens in every industry.  Where are the older versions of digital cameras?  Cell phones?  Blenders?  Digital pianos?  Any item that changes from year to year sits on shelves for a little while after its replacement comes out until the retailer reduces its price by enough and it sells.  The only exceptions are goods that depreciate very quickly or go bad, which are recycled or thrown away (like fresh produce, for example). It seems kind of crazy at first that essentially all goods that are produced by the economy are consumed, but that's the magic of capitalism: prices make markets clear. Other than being reduced to clear as others have suggested quite a few get sold to large motor stores. You can often go in and find last years model with around delivery mileage at a very knocked down rate because most people would prefer the latest model direct from the dealer. Doing this allows dealers to clear old stock incredibly quickly so they can promote the newest model exclusively.
There are many reasons for buying new versus used vehicles. Price is not the only factor.  This is an individual decision. Although interesting to examine from a macro perspective, each vehicle purchase is made by an individual, weighing many factors that vary in importance by that individual, based upon their specific needs and values. I have purchased both new and used cars, and I have weighted each of these factors as part of each decision (and the relative weightings have varied based upon my individual situation). Read Freakonomics to gain a better understanding of the reasons why you cannot find a good used car. The summary is the imbalance of knowledge between the buyer and seller, and the lack of trust. Although much of economics assumes perfect market information, margin (profit) comes from uncertainty, or an imbalance of knowledge.  Buying a used car requires a certain amount of faith in people, and you cannot always trust the trading partner to be honest. Price - The price, or more precisely, the value proposition of the vehicle is a large concern for many of us (larger than we might prefer that it be). Selection - A buyer has the largest selection of vehicles when they shop for a new vehicle. Finding the color, features, and upgrades that you want on your vehicle can be much harder, even impossible, for the used buyer. And once you have found the exact vehicle you want, now you have to determine whether the vehicle has problems, and can be purchased at your price. Preference - A buyer may simply prefer to have a vehicle that looks new, smells new, is clean, and does not have all the imperfections that even a gently used vehicle would exhibit. This may include issues of pride, image, and status, where the buyer may have strong emotional or psychological needs to statisfy through ownership of a particular vehicle with particular features. Reviews - New vehicles have mountains of information available to buyers, who can read about safety and reliability ratings, learn about problems from the trade press, and even price shop and compare between brands and models. Contrasted with the minimal information available to used vehicle shoppers. Unbalanced Knowledge - The seller of a used car has much greater knowledge of the vehicle, and thus much greater power in the negotiation process. Buying a used car is going to cost you more money than the value of the car, unless the seller has poor knowledge of the market. And since many used cars are sold by dealers (who have often taken advantage of the less knowledgeable sellers in their transaction), you are unlikely to purchase the vehicle at a good price. Fear/Risk - Many people want transportation, and buying a used car comes with risk. And that risk includes both the direct cost of repairs, and the inconvenience of both the repair and the loss of work that accompanies problems. Knowing that the car has not been abused, that there are no hidden or lurking problems waiting to leave you stranded is valuable. Placing a price on the risk of a used car is hard, especially for those who only want a reliable vehicle to drive. Placing an estimate on the risk cost of a used car is one area where the seller has a distinct advantage. Warranties - New vehicles come with substantial warranties, and this is another aspect of the Fear/Risk point above. A new vehicle does not have unknown risk associated with the purchase, and also comes with peace of mind through a manufacturer warranty. You can purchase a used car warranty, but they are expensive, and often come with (different) problems. Finance Terms - A buyer can purchase a new vehicle with lower financing rate than a used vehicle. And you get nothing of value from the additional finance charges, so the difference between a new and used car also includes higher finance costs. Own versus Rent - You are assuming that people actually want to 'own' their cars. And I would suggest that people want to 'own' their car until it begins to present problems (repair and maintenance issues), and then they want a new vehicle to replace it. But renting or leasing a vehicle is an even more expensive, and less flexible means to obtain transportation. Expense Allocation - A vehicle is an expense. As the owner of a vehicle, you are willing to pay for that expense, to fill your need for transportation. Paying for the product as you use the product makes sense, and financing is one way to align the payment with the consumption of the product, and to pay for the expense of the vehicle as you enjoy the benefit of the vehicle. Capital Allocation - A buyer may need a vehicle (either to commute to work, school, doctor, or for work or business), but either lack the capital or be unwilling to commit the capital to the vehicle purchase. Vehicle financing is one area banks have been willing to lend, so buying a new vehicle may free capital to use to pay down other debts (credit cards, loans). The buyer may not have savings, but be able to obtain financing to solve that need. Remember, people need transportation. And they are willing to pay to fill their need. But they also have varying needs for all of the above factors, and each of those factors may offer value to different individuals. Banks have huge amounts of foreclosure or pending foreclosure properties on their books that they haven't even listed for sale yet. The ratio is something like 6 to 1. The amount of inventory held on the books, but off the market is larger than the entire MLS market.  In a competitive market, a smart bank would try to dump their property now before the other banks do. But instead, all the banks are holding their properties off the market and trickling them out at a slow rate.  Collusion? Not all cars but just those &lt; $25k (Skoda, Nissans, VW, Ford, Renault )!! Economic class vehicles, which basically are driven by the middle class.   While elite automobiles (anything above this) and to pleasure of the oligarchs and politicians, will continue to pour in. So in the &lt;$25k segment either Russian built or from non-sanctioned nations (S.Korea-? and China), the prices will obviously inflate dramatically with the decrease in supply.   The poor and middle class are the only ones going to suffer with this. This fucking economics 101, if not common-sense !!! Either they are too stupid to realize this or this is just some machiavelic plan !!  edit: [В Госдуме сообщили о возможном запрете на ввоз авто дешевле 800 тысяч рублей](http://lenta.ru/news/2014/08/19/avto/) -- The State Duma has reported a possible ban on the import of cheaper car 800 thousand rubles This same problem existed when the first gas powered cars began popping up. The problem your pointing out will get resolved as demand grows. It will actually be quite a business opportunity for some.  It will surely deter some, like yourself, from being early adopters, but these things always work themselves out. I learned something new, I always thought it was the camery being number selling vehicle. Why not other trucks? Why is f150 so popular by that far?   Even with this kind of sales number they still needed bailout, surprised. I guess I don't know business costs. This sounds like it has happened for other events so is it really that newsworthy?   I was hoping to learn some scientific reason like eclipse sunlight will boil gasoline.  Or maybe the CEO has a theory that eclipses affect gravity and he doesn't want his cars floating away.   Nope... Just oversold his supply. &gt;Something to watch out for if you are analyzing this stuff though is the influx of used cars into the market. Remember, more defaults means more repossessions which means more used cars on the market.  I think Morgan Stanley said they expect to see up to a 50% decline in used car prices over the next four years.  Edit: [Can't find the report, but here's the Market Watch summary](http://www.marketwatch.com/story/how-much-morgan-stanley-thinks-used-car-prices-will-crater-in-one-chart-2017-04-03) "Care to elaborate? It is my understanding that any asset can be rehypothecated at least in theory. By saying these car loans ""aren't"" rehypo'd, do you mean this is not the practice, or that there is a law/regulation prohibiting it?" Yeah, the Ford F-150 has been the top selling vehicle for over 30 years.   Fun fact, farmers who receive money from the government usually burn excess cash in December. A lot of them just replace their fleets each year. Tesla is not planning to sell 100k cars in 2015, they plan to have an annualized run rate of 100k by the end of 2015.  Also, the luxury market is pretty close to 50/50 between large sedans and SUVs, so Tesla figures they can sell as many SUVs as they can sell sedans, and they can almost certainly sell 50k sedans considering they're easily selling 35k without advertising whatsoever and with long wait times and barely having penetrated China or RHD markets.  Also, that 100k is worldwide, not just in the US. There are many places in the US without taxis or public transportation. I don't think self driving car fleets where you call one on demand will get a foothold. It would be impractical to send a car 20 miles to pick someone up and drive them to work every day. Even with algorithms that car pool people, the cost will be high. [This article](http://www.factcheck.org/2011/03/who-sells-american-gasoline/) shows that gasoline at any given station is combined in transport or processing; making it impossible to tell if your oil came from a certain company. &gt;While gasoline is sold at about 162,000 retail outlets across the nation, about one-third of these stations are “unbranded” dealers that may sell gasoline of any brand. The remainder of the outlets are “branded” stations, but may not necessarily be selling gasoline produced at that company’s refineries. This is because gasoline from different refineries is often combined for shipment by pipeline, and companies owning service stations in the same area may be purchasing gasoline at the same bulk terminal. In that case, the only difference between the gasoline at station X versus the gasoline at station Y may be the small amount of additives that those companies add to the gasoline before it gets to the pump. Good point.  Maybe someone should invent a 'trust system' similar to the one that many new companies in the 'shared economy' sector use (like Airbnb, Uber etc.) where users rate the state of the vehicle when it arrives.  Those users that leave it in a bad condition will get bad ratings and will quickly find that either they have to pay a cleaning penalty, and/or the cost of the next vehicle hire increases, and/or they are declined from using the service in the future.  Whereas those that consistently look after the vehicle will be incentivized with bonuses and/or discounts.  If a user does find the vehicle to be uninhabitable then they would record this fact on their smart device and be offered a replacement vehicle and/or discounts etc. You have to consider a case where you just cannot sell it. Think of it as a bad piece of real estate in Detroit. If there are absolutely no buyers, you cannot sell it (until a buyer shows up) I work for an auto finance company and have performed some job related analysis looking into this as well. From what I can tell I don't think the numbers are there for a 2008 recession. The loans are smaller, the asset is already known to depreciate, and the auction market is pretty effective at cutting deficiencies even more.   Something to watch out for if you are analyzing this stuff though is the influx of used cars into the market. Remember, more defaults means more repossessions which means more used cars on the market.   I'm curious to see what happens with this influx of used, relatively reliable cars onto the market and how this impacts the constant pumping out of new vehicles  that manufacturers are forced to meet. We've already seen scaling back by some big players. There's definitely something happening in the auto industry but I don't know what to make of it yet and I would hardly say we are looking at Great Recession 2.