Ford And GM Are Now Warning Shrewd Car Dealers For High Price Markups

[FrankThompson]

Hmmmm
I admit that I can be confused between my wants VS needs.
But my brain has convinced me that I neeeeeed stuff all the time that probably wouldn't hold up in the zombie apocalypse.

Technically I only need oxygen, water, and some protein?

I thought I needed this candy corn I'm eating. Then I remembered why it's only sold once a year....LOL

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[Snakebitten]

I thought I needed this candy corn I'm eating. Then I remembered why it's only sold once a year....LOL

There's gotta be at least one molecule of protein in that corn somewhere!

 

[HammaMan]

It's strange that we're three pages in to this discussion and no one has mentioned this idea of a market economy, although who are saying that it's up to the consumer have it right, IMHO.

Dealers are currently getting their dues.....

Vehicle market has fallen substantially and dealers are sitting on old inventory they can't sell at their inflated prices. It costs money to keep cars on the lot and I've seen a handful of cars I've been tracking for 6 weeks now suddenly drop in price, up to 10% or so when one finally sold due to my actions.

Amazing just how bad at business some of them are. Too much easy money thrown their way has made them dumb, now they're having to sell vehicles they purchased over the summer for less than they paid for them and people sill aren't buying them.

 

[PaulGrun]

Dealers are currently getting their dues.....

Vehicle market has fallen substantially and dealers are sitting on old inventory they can't sell at their inflated prices. It costs money to keep cars on the lot and I've seen a handful of cars I've been tracking for 6 weeks now suddenly drop in price, up to 10% or so when one finally sold due to my actions.

Amazing just how bad at business some of them are. Too much easy money thrown their way has made them dumb, now they're having to sell vehicles they purchased over the summer for less than they paid for them and people sill aren't buying them.

I respectfully disagree. During the summer when demand was high and supply was low, they raised prices. Later in the fall, as supply increased and demand fell, they are lowering prices in a bid to stimulate demand.
In a free market, capitalist system that is exactly what they should be doing … adjusting prices to meet the market.

 

[HammaMan]

I respectfully disagree. During the summer when demand was high and supply was low, they raised prices. Later in the fall, as supply increased and demand fell, they are lowering prices in a bid to stimulate demand.
In a free market, capitalist system that is exactly what they should be doing … adjusting prices to meet the market.

Feel free to disagree -- I've been watching the same bank of vehicles for just over 6 weeks now and the only thing that's happened since I've been watching is one has sold, and it's sitting 5 meters from me. All others have dropped their prices. I've made a spreadsheet to calculate actual market values and after sharing it with a few dealers, I shit you not, 2 of them have changed their prices to that exact value. It's obvious it was done because it matches the price exactly, one of which was 67,877 with $1k dealer fees and it's now priced 66,877

Changing prices to reflect market demand suggests that vehicles are selling. Given the same exact bank of vehicles sans mine are still unsold, the pricing still doesn't reflect the market. If it did, they'd sell.

 

[PaulGrun]

Feel free to disagree -- I've been watching the same bank of vehicles for just over 6 weeks now and the only thing that's happened since I've been watching is one has sold, and it's sitting 5 meters from me. All others have dropped their prices. I've made a spreadsheet to calculate actual market values and after sharing it with a few dealers, I shit you not, 2 of them have changed their prices to that exact value. It's obvious it was done because it matches the price exactly, one of which was 67,877 with $1k dealer fees and it's now priced 66,877

Changing prices to reflect market demand suggests that vehicles are selling. Given the same exact bank of vehicles sans mine are still unsold, the pricing still doesn't reflect the market. If it did, they'd sell.

Just curious, how did you "calculate actual market values"? Did you survey potential buyers in your area to determine the price that would move those vehicles?
FWIW, as noted above, a dealer will raise OR lower prices in response to his perception of the current market value for the product he is selling, where "market value" means the price that buyers are willing to pay. If the vehicles on the dealer's lot are still unsold after having been re-priced, it may mean that the dealer believes he can find a buyer for that vehicle at that price.

 

[2mileshigh]

For the guys who blame the dealer, or blame the manufacturer, see here's the thing: We live in a market economy. A free market economy.
In such an economy, any rational profit making enterprise, like Ford, or like a dealer, has an obligation to its owners to maximize profit. Their obligation is to those who own the company whether it's a small family owned business or a large publicly held company like Ford. The company's obligation is not to the consumer ... any loyalty shown to the consumer is purely in the name of maximizing long term profitability.
That being said, any rational private enterprise will almost always obey the basic rules of economics - it will sell its goods or services at whatever price the market will bear.
When supply is low or demand is high (or both), the vendor can naturally command a higher price. When there is an excess of supply or a lack of demand (or both), the price goes down until buyers feel incented to buy the product. Supply and demand.
Conversely, as consumers, we are not compelled to buy the good or service - we are always free to defer the purchase, or patronize the competition, or seek alternate transportation, or whatever. If the price is too high, we won't generally buy the product. If it's too low, then lots of us will want to buy the product.

It's strange that we're three pages in to this discussion and no one has mentioned this idea of a market economy, although who are saying that it's up to the consumer have it right, IMHO. For the life of me, I can't understand why anyone would think that FoMoCo would want to lower prices for us just because they're nice guys. That would be entirely contrary to the Prime Directive - maximize profits to the owners. They will definitely lower prices if they need to sell more units, and will definitely raise prices when market conditions permit them to do so. Supply and Demand.

Someone up above drew an analogy to food prices, but I believe the analogy is imperfect. The reason is because food is a very high volume commodity with a very very competitive retail marketplace. The gross margin in the grocery business is t-i-n-y...a couple of percent at most. In the eyes of an economist, that's the sign of an efficient market meaning that supply and demand are close to being in balance. Profit is made by selling a bazillion cucumbers at a profit of .0001 cent each.
Ford trucks is a different story. There's only one supplier (Ford) and they are selling a relatively small number of trucks vs the number of cucumbers that Safeway sells.

For sure as the price of a Ford truck goes up Ford will lose some sales - some potential buyers will go to GMC, some will keep their old truck a few more years, some will decide to buy a bicycle and hitch up a wagon, and some will decide that as much as they'd like a truck, they can really get by with a Prius. A few folks who really, really, really must have a truck now will accept (grudginigly) a higher price because they have no choice. But since a truck is major purchase, and since there are relatively few competitors in the market place, the manufacturer naturally does have more latitude to squeeze a higher price from the consumer. Ford's profit is earned by charging a decently large margin on a volume measured in the hundreds of thousands of units. And as I mentioned above, he has an obligation to his owners to maximize that profit.
Furthermore, food tends to be 'fungible' - if the price of meat gets too high, consumers switch to other forms of protein which reduces demand for meat which causes the meat producers to reduce supply and/or reduce price.

The truck market works more-or-less the same way, but it is much less granular since they are selling a product that requires them to forecast demand years into the future and buying a truck isn't like buying cucumbers.

All the above is just the way a market economy like ours works. It's possibly the worst economic system in the world, but only if you ignore all the others.
Now let's get back to talking about trucks. I am really enjoying my '22 XLT Supercrew high model, for which I paid MSRP and no extra dealer fees for a truck that had just arrived on the dealer's lot. Sure, it was a lot of money. But I'm pretty happy with it. Even if I'm not completely crazy about the color. But hey, life is full of tradeoffs, eh?

Net profit in the grocery business is 3% to 5%, but gross margin starts at approximately 50% depending on the department.

 

[HammaMan]

Just curious, how did you "calculate actual market values"? Did you survey potential buyers in your area to determine the price that would move those vehicles?
FWIW, as noted above, a dealer will raise OR lower prices in response to his perception of the current market value for the product he is selling, where "market value" means the price that buyers are willing to pay. If the vehicles on the dealer's lot are still unsold after having been re-priced, it may mean that the dealer believes he can find a buyer for that vehicle at that price.

Mileage , months of warranty, body condition, color, vehicle sales, and.... my favorite part, the cost for me to retrieve the car (especially funny to see that value used) -- but the fact is that I'm in a different market so the 2 dealers that used my numbers were perhaps enticing those in my area to retrieve such a vehicle thus reducing the vehicles. It was "my market value", not local market value. Given that none have sold yet, they're still ABOVE market value.

Market value is after all what the market (buyer) is willing to pay (ala, sales occur). A price that's on a vehicle that doesn't sell isn't market value, it's simply an invitation to negotiate. Dealer fees are nuts however. From 0 to $1200 of just complete nonsense. The practice should be outlawed -- in such that a price listed is the actual price of the vehicle.

 

[2mileshigh]

Castle Rock Ford in Colorado is adding a $15K to $25K market adjustment on new Broncos, depending on model and options.

 

[personalt]

Not ridiculous. You disregard one's need or want for a car. Everybody needs and wants food and will pay what has to be paid. An apt analogy. If you want or need a car it's obvious people are paying what has to be paid. They don't want to but they have little choice. They're innocent. The carmakers can stop this practice. They're all talk no action. But if you want to blame the customer, you do you.

But we are not in a spot where grocery stores are running out of food. At MSRP dealers are running out of trucks. Local dealer that is 5K over has maybe 3 F150s in total. I am sure if he was at MSRP he would have zero. Truck makers can stop this action by making way more trucks.

 

[oneinch]

But we are not in a spot where grocery stores are running out of food.....

No argument about inventory, but you're not understanding the grocery analogy. The customer is not to blame for above MSRP. A customer in need of a truck or groceries will pay what they need to pay.

The point of this post: carmakers wining that they shouldn't be blamed for the above MSRP prices. They should be blamed because they sure aren't doing anything to keep prices at MSRP. They talk a big game but show no action. It's not the fault of the customer because they have to pay what they have to pay.

The dealers rightfully get most of the blame because they're the ones setting there prices. No one cares what their reasons are.

 

[PaulGrun]

...

The point of this post: carmakers wining that they shouldn't be blamed for the above MSRP prices. They should be blamed because they sure aren't doing anything to keep prices at MSRP. They talk a big game but show no action. It's not the fault of the customer because they have to pay what they have to pay.

The dealers rightfully get most of the blame because they're the ones setting there prices. No one cares what their reasons are.

I am still having a hard time with this argument, which implies that the dealers have some sort of an obligation to keep prices at MSRP.
But they have no such obligation. Just the opposite: They have an obligation to maximize profits.
I've said it in a few posts earlier in this thread, but it has to be repeated: The fact is that we live in a capitalist, free market economy. That means that the dealer has an obligation to his owners/shareholders to provide maximum return on the owners/shareholders investment. And that means he has an obligation to maximize profit. Period.
Conversely, it is just nuts to think that the dealer, through some sense of loyalty to his customers or for whatever reason, is going to keep prices at MSRP. Not when the market will bear prices above MSRP. No rational private enterprise is going to leave profits on the table. That's not the way a market economy works.
I'm not blaming *anybody* - as long as the dealer has customers who are willing to pay the prices he is asking, then it is what it is.

 

[oneinch]

With respect blah blah blah

The post isn't an argument that dealers don't have the right to charge a gazillion dollars. It isn't an argument about dealers really. It's about carmakers not wanting any blame for prices above MSRP. (I gotta ask; did you read the article in the original post?) I think they do have blame. The carmakers say they're going to do something about this. They're all talk no action. The carmaker may not actually set the price, but they can influence the price. I also think the customer is not to blame for paying a gazillion dollars. As with groceries the customer pays what they have to pay.

 

[personalt]

No argument about inventory, but you're not understanding the grocery analogy. The customer is not to blame for above MSRP. A customer in need of a truck or groceries will pay what they need to pay.

The point of this post: carmakers wining that they shouldn't be blamed for the above MSRP prices. They should be blamed because they sure aren't doing anything to keep prices at MSRP. They talk a big game but show no action. It's not the fault of the customer because they have to pay what they have to pay.

The dealers rightfully get most of the blame because they're the ones setting there prices. No one cares what their reasons are.

I agree with your comments, just don't think grocery store is best anology because no one (thankfully) is being put in the position of having the to buy no food or offer more then shelf price to get food. Only fix for this issue is for supply to catch up. Once MSRP dealers have more inventory, the over MSRP dealers will need to drop prices to keep inventory moving. Nothing else will fix prices. Manufacturers that can increase production to flood their dealerships will steal marketshare from other brands

 

[Rockman5159]

I know you're not... Funny thing... when she brought it home I swear I asked "did you pay over sticker for that?" and she said "no". Well after my 5 minute rant on how stupid people are who pay over sticker was over, I found out she paid $5k over sticker. I mean. I didn't mean to hurt her feelings, but she is the dumb one who did it. She even had multiple chances after that to get out of it and just didn't.


I think being me (socially awkward), I would have said "Son, that's nothing to be proud of". LOL



Did you tell him you'd take it off his hands for free so he wouldn't have to worry about the hassle? LOL



Yeah. My point was even people who should know better, and between me and my wife's father (RIP), she should have known better. Her whole life she's heard about her grandfather could buy a car for a good price, drive it around for 6-18 months, then sell it for a profit (this was even before covid. Guy was great at it!). But she let her emotions get the best of her. And I get that, I really do. It's a struggle to keep my wife in check when she buys cars too (and even myself to some degree). You still have to be smarter than the dealerships and be your own biggest advocate (not just when buying a car)

I don't see how someone can sleep at night knowing that they actually ripped off a customer like that. The KIA dealers in my area also are known as con artist. What a shame.

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