Factory Orders vs Dealer Stock Purchases
When it comes to procuring vehicles, there are essentially two options: purchasing off of a dealer’s lot or ordering directly from the factory. Both methods come with benefits and drawbacks. In this post, we’ll analyze some of the pros and cons of each method.
Factory Ordering Benefit #1: Lower Costs
If cost is important to your company, then factory ordering may be the way to go. Factory ordering allows you to circumvent the litany of fees, ancillary charges, and markup associated with a dealer purchase. Ordering directly from the factory also allows you to take advantage of fleet incentives that may not otherwise have been available if purchased through a dealer. Depending on the manufacturer, that could result in saving thousands of dollars per vehicle.
Factory Ordering Benefit #2: Standardization
Another benefit of factory ordering is that you’re able to acquire the exact vehicle you want, every time. Because you’re ordering through the factory, you’re not at the mercy of what a dealer has available at the moment. With factory ordering, you choose the exact trim level, color, and equipment to be included, and the vehicle is then built to your specifications. This ensures that there is no unnecessary variation within your fleet.
Factory Ordering Drawback #1: Lead Time
Because each vehicle is custom made to your specifications, factory ordering can be a lengthy process. Typically, vehicles can take anywhere from 2-6 months to be delivered, depending on the manufacturer. Vehicles built overseas will tend to take longer as they have to be loaded on a ship, make their way across the ocean, clear customs, get loaded onto a train, and travel to their destination.
Dealer Stock Purchasing Benefit #1: Faster Process
In most cases, sourcing a vehicle from dealer stock is going to be a much faster process than factory ordering. This is because the vehicles on a dealer’s lot are already built and don’t need to be shipped. This process can be extremely useful in situations such as a new hire, a total loss, or a catastrophic mechanical failure. If you find yourself in a situation where you absolutely cannot wait, purchasing from dealer stock would be the way to go.
Dealer Stock Purchasing Drawback #1: Increased Cost
While a dealer stock purchase may be a fast way to procure a vehicle, it’s likely going to be a costly one, especially in comparison to a factory order. Dealer markup, documentation fees, transportation fees, retail vs. fleet incentives, all of that extra cost is going to be passed on to you. Not only will the cost likely be higher than a factory order, but pricing among the various vehicles in your fleet will be inconsistent as well. Where one dealer may agree to sell a vehicle for one price, another dealer may sell the vehicle for a completely different price depending on location, demand, and a host of other reasons.
Dealer Stock Purchasing Drawback #2: Limited Selection
When procuring from dealer stock, there is also no guarantee that the vehicle you want is even going to be available. If the vehicle that you’re looking for is popular, or production has halted, supply may be limited, and dealers may be reluctant to sell them to non-retail clients.
Additionally, when sourcing from a dealer, you have to be willing to be flexible in regards to equipment. While you may want an all-wheel drive vehicle, if you’re driver is located in Texas, front-wheel drive may be all that’s available. You may not want to include a Premium Package, but if you’re looking at a higher trim model, that may be all that’s available. Under the dealer stock method of procurement, you’re at the mercy of what’s available on a dealer’s lot.