Suggestion for DCX: dealer markup crackdown

[Phazer22]

Im patient, so ADM is not an issue. My only concern is the original MSRP. I hope DCX doesnt price this car to far from the Mustang.

[Legion681]

Originally Posted by DanRealtor

...
The manufacturer dictating the allowable price to the dealerships could never work. Here is what would have to happen: The dealerships would no longer be able to operate and and make a profit in expensive areas. We would all wind up having to drive to BFE to buy our cars AND to get them serviced. Or, the dealers would have to raise prices on parts and service to recoup the loss and stay in business.
...

With all due respect, I disagree at 100 %.

I happen to be a foreigner (I am a Swiss citizen) that moved to the USA fairly recently (3 years ago).
Before this, because of my job I worked in several European countries and, seen that cars are my # 1 passion, I was able to observe how it works in some of them as far as car's buying/selling is concerned.
Well, even though I can only be sure at 100 % about Switzerland and Italy (= nations where I bought cars), I can tell you that manufacturer-dictated prices work very well.
No matter where they are located, it's mandatory for dealership to sell cars at the price the manufacturer feels appropriate. And let me tell you, I have never seen any dealership go bankrupt and as a matter of fact they seemed to thrive quite well (and this in spite of prices over there: cars are much more expensive in Europe. Example: a Z06 in Italy will cost you 83,950 Euros or a cool $100,740...My last car over there was a BMW M3...it costed me 101,000 Swiss Francs...or roughly $77,700...so, just to be clear, it isn't cheaper than here...).
And it all makes sense to me: if you mark up a car $10k, you might sell 1 or 2 of them, if you sell them at MRSP you might sell 10 or 20 or more.
If you can't afford to have a dealership in Manhattan (or for that matter in the middle of London or Zuerich or Milan), you don't have to. You can always sell your cars in the suburbs with equal or even more success (who the heck will buy cars in Manhattan ? You don't need to), so IMHO to use the excuse that selling cars in Manhattan has more costs than selling them somewhere in Iowa, it's not a reason why car dealerships should try to rip possible clients off with mark ups.
This also makes even more sense in this day and age, where big companies like GM and Ford are struggling. Dealerships that have mark ups are acting as bottlenecks: for their own greed, they'd rather sell 1 or 2 cars with a 10k mark up rather then sell 20 of them, while in the mean time Ford and GM are in dire need of selling as many vehicles as possible.
The bottomline is simple: selling cars at MSRP would be better for everybody (manufacturers and their workers, thousand upon thousand of them, mostly American people. And all possible buyers...again most of them Americans...and with this I mean that people that are screwed up aren't some poor idiots on the other side of the world. It's happening to YOU.) but greedy dealers, selling cars with mark ups benefits only dealerships.
And this is even more of a sin when this ridiculous system that allows mark ups could be easily changed and it would work, as it works in tons of other countries in the world.
I don't know how someone could defend dealerships that apply mark ups, honestly I can't see why.

My $0.02

[sorbs]

Originally Posted by DanRealtor

The dealership buys cars from the manufacturer.

The manufacturer "Suggests" a retail price.

The dealership is in business to make a profit.

Overhead is a function of location.

Agree with you 100% Dan. Free market baby. If you want it bad enough you'll pay. Look at SRTs today. They are finally coming down to MSRP or lower. $3 a gallon puts pressure on anything with a V8. At least the manufacturers are not cancelling products based on a fake oil scam like they did in the 70s.

Wait 2 years after release to buy at MSRP. If you really want the best one wait 5 years after release. That way you'll get a drop top, a 392ci and every option available below MSRP.

[allhemi]

Originally Posted by Ted@MPSC

You know, there is a funny thing about the so called supply for the SRT's. I accidently intercepted a phone call from Chrysler vehicles last week. They were trying to find a dealership to unload a bunch of SRT-8 Chargers, and Magnums to. They asked me if we would be willing to take 3 Black, 1 Red, and 1 Silver SRT-8 Chargers and 2 Silver SRT-8 Magnums allocations. I told her we would love too, but we are not a Dodge dealer.

This just goes to show you that there is no shortage!! Dealers can kiss my ass if they think I'll pay over MSRP for this car!

[DARK AGE 53]

Originally Posted by sorbs

Wait 2 years after release to buy at MSRP.

If I have to wait 2 years I won't even pay MSRP, we can debate this all day long but it's up to DCX to which way they want this to go.

[DanRealtor]

Originally Posted by Legion681

With all due respect, I disagree at 100 %.

I happen to be a foreigner (I am a Swiss citizen) that moved to the USA fairly recently (3 years ago).
Before this, because of my job I worked in several European countries and, seen that cars are my # 1 passion, I was able to observe how it works in some of them as far as car's buying/selling is concerned.
Well, even though I can only be sure at 100 % about Switzerland and Italy (= nations where I bought cars), I can tell you that manufacturer-dictated prices work very well.
No matter where they are located, it's mandatory for dealership to sell cars at the price the manufacturer feels appropriate. And let me tell you, I have never seen any dealership go bankrupt and as a matter of fact they seemed to thrive quite well (and this in spite of prices over there: cars are much more expensive in Europe. Example: a Z06 in Italy will cost you 83,950 Euros or a cool $100,740...My last car over there was a BMW M3...it costed me 101,000 Swiss Francs...or roughly $77,700...so, just to be clear, it isn't cheaper than here...).
And it all makes sense to me: if you mark up a car $10k, you might sell 1 or 2 of them, if you sell them at MRSP you might sell 10 or 20 or more.
If you can't afford to have a dealership in Manhattan (or for that matter in the middle of London or Zuerich or Milan), you don't have to. You can always sell your cars in the suburbs with equal or even more success (who the heck will buy cars in Manhattan ? You don't need to), so IMHO to use the excuse that selling cars in Manhattan has more costs than selling them somewhere in Iowa, it's not a reason why car dealerships should try to rip possible clients off with mark ups.
This also makes even more sense in this day and age, where big companies like GM and Ford are struggling. Dealerships that have mark ups are acting as bottlenecks: for their own greed, they'd rather sell 1 or 2 cars with a 10k mark up rather then sell 20 of them, while in the mean time Ford and GM are in dire need of selling as many vehicles as possible.
The bottomline is simple: selling cars at MSRP would be better for everybody (manufacturers and their workers, thousand upon thousand of them, mostly American people. And all possible buyers...again most of them Americans...and with this I mean that people that are screwed up aren't some poor idiots on the other side of the world. It's happening to YOU.) but greedy dealers, selling cars with mark ups benefits only dealerships.
And this is even more of a sin when this ridiculous system that allows mark ups could be easily changed and it would work, as it works in tons of other countries in the world.
I don't know how someone could defend dealerships that apply mark ups, honestly I can't see why.

My $0.02

Thank you! You made my point exactly!

In Switzerland and Italy the Manufacturer dictates the price and everyone pays more for their cars! As the guys from the Guinness commercial say: BRILLIANT!

Then everyone in the US could enjoy Scottsdale AZ Pricing! Woo Hoo! (More like Boo Hoo for most people though)

The dealers are not acting as a bottleneck. When cars like SRT-8's really are in short supply, the dealer is not motivated to sell one when they get it. Ask any dealer: They sell a lot of base models or other less expensive cars to people who come in to see the SRT-8 that isn't in their bugdget!

If the dealers could get as many SRT-8's as they wanted the price would be cheaper. The dealer would love to sell 20 SRT-8's. They just can't get the allocations.

And regardless of pricing, there are a finite number of people in the market for a new car each month. GM's problem has nothing to do with the mark up on a Z06 (it was 38k in October, now it's only 15k here in AZ). GM's problem is a lack of vision. Too many models and no Style. Look at their new Malibu SS. They'd better offer a low price to sell those!

Ford sells a lot of trucks. Mustangs are still popular. I like the retro styling. But other than that? What do they offer?

DCX just posted better numbers AGAIN for the month, quarter and year! They offer style throughout their entire product line.

I stand by my original post supporting Free Enterprise based on supply and demand. Feel free to not buy if you don't like the price.

[Mike Penner]

I never argued in favor of price fixing or against the "free market". The ONLY thing I am arguing is price gouging, dealer markups, or "letting the market run its course" (whatever you want to call it) is NOT good for DCX's bottom line. It costs them sales. Thats it, the whole extent of my argument. This isn't about what's good for the dealer or which economic model we should follow.

Heres my logic, if you see a fault please correct me. Both dealers reside in the same general area and sell over the same general timeframe.

Dealer #1 gets a 4 SRT allocation and marks it MSRP + $10000.

Dealer #2 gets a 4 SRT allocation and sells for MSRP.

Dealer #1 sells 2 out of 4 cars because it found two buyers willing to pay the 10k extra. Bravo. Meanwhile the other two cars languish on the lot.

Dealer #2 sells all 4 cars the moment they hit the showroom floor because the price appeals to a wider audience.

Dealer #1 is sitting on 2 cars that he can't move. Lets assume he doesn't drop the price (which may or may not be accurate).

Dealer #2 is waiting for his next SRT allocation and probably fending off customers who would buy on the spot.

Total cars sold: 6.

In a different scenario both dealer #1 and #2 sell for MSRP or thereabouts. Both sell out almost immediately.

Total cars sold: 8.

I know there are variables in there but this will be the overall trend, repeated nationwide. Basic math tells me 8 > 6. I don't think I need to do calculus or apply advanced economic theory to run the numbers. If you tell me you'd never get a circumstance where one dealer is selling for 10k over and another one nearby is selling for MSRP I'd say it sounds an awful lot like collusion (price fixing... a bad thing, your own words). After all, we are talking about the "free market" right? These guys are supposed to be able to set their own prices since they bought the cars from DCX directly (again your own words). If I'm completely off on this someone feel free to tell me how it really works.

I get the feeling the free marketeers (in any other argument I'd be one) are arguing from the point of view of what's best for the dealer. We all know whats best for the dealer. I'm saying it isn't best for DCX. I'll grant you there are genuine scarcity issues especially in the first year of the car so maybe during this period markups would be more appropriate. But the moment the supply catches up with demand the markups need to go, for DCX sake.

PS: Many thanks to Dan for that previous bit of info regarding CA cars. After some research it does indeed look like a CA native can buy a car from any state as long as it is 50 state smog legal. While I stand by my original assertions re: dealer markup effects on DCX bottom line the whole debate may be a moot point from the buyer's point of view. I was under the impression that a CA native had to buy within CA and that doesn't look to be the case. The moment you realize you can buy on a national level the rules of the game definately change.

[R/T N V]

reading through all of this, i can certianly understand where you all are coming from. but the reality is that dealers will try to stick it in your pooper without lube, regardless of what car they happen to be selling. the challenger is hot and they know it and they know that if you arent willing to pay what they want someone else will. it all boils down to the "haves" and "have-nots". those who "have-not" want it, and those that "have" will be sitting on an inflatable pillow for awhile.

[Legion681]

Originally Posted by DanRealtor

Thank you! You made my point exactly!

In Switzerland and Italy the Manufacturer dictates the price and everyone pays more for their cars! As the guys from the Guinness commercial say: BRILLIANT!

Then everyone in the US could enjoy Scottsdale AZ Pricing! Woo Hoo! (More like Boo Hoo for most people though)

The dealers are not acting as a bottleneck. When cars like SRT-8's really are in short supply, the dealer is not motivated to sell one when they get it. Ask any dealer: They sell a lot of base models or other less expensive cars to people who come in to see the SRT-8 that isn't in their bugdget!

If the dealers could get as many SRT-8's as they wanted the price would be cheaper. The dealer would love to sell 20 SRT-8's. They just can't get the allocations.

And regardless of pricing, there are a finite number of people in the market for a new car each month. GM's problem has nothing to do with the mark up on a Z06 (it was 38k in October, now it's only 15k here in AZ). GM's problem is a lack of vision. Too many models and no Style. Look at their new Malibu SS. They'd better offer a low price to sell those!

Ford sells a lot of trucks. Mustangs are still popular. I like the retro styling. But other than that? What do they offer?

DCX just posted better numbers AGAIN for the month, quarter and year! They offer style throughout their entire product line.

I stand by my original post supporting Free Enterprise based on supply and demand. Feel free to not buy if you don't like the price.

No, dude, LOL...you got it all wrong: cars (and everything else, I might add...I really mean it: everything costs more in Europe than in the USA) in Europe cost more than here because there are much more taxes on them, it's not due to the fact that car prices are regulated by the manufacturers !
Come on, be serious...
Oh, and of course over there you can as well get cars under the MRP, like here, but price gouging is not allowed, not even a cent: after all doesn't it make sense seen that the MSRP is the price that manufacturers consider fair for selling their products to their clients ??? To me it does.

I understand that high end models sell less than more bread-and-butter ones do, but in any case you must admit that putting a mark up on any vehicle will not for sure make it more interesting to a possible buyer: raising a vehicle's price cannot be considered under any circumstance something that invites a client to buy a car... And from this point of view, it can only be considered a hindering to the production of that type of vehicle (in simple words: it does not help to sell it --> no sale, no need to produce more...)...Even if you don't agree with this, I still am not seeing any advantage that mark ups offer, not only to possible buyers but as well to manufacturers and their workers.
This said, I understand that the major problem of GM and Ford is not mark ups, I am not so naive and neither are you for sure, but I am sure that if mark ups have any impact on their situation, for SURE it cannot be anything positive and I am persuaded of that, unless you can prove me wrong on this...

Of course I feel free not to buy if I don't like the practice of price gouging (which all in all I consider pretty much immoral...to me it's legalised robbery. As I already stated, there is a solution, but I guess in the USA people prefer to be robbed of several thousand dollars...I don't understand why, but hey good for you, if you like it. I personally don't...): as a matter of fact, seen that I put my money where my mouth is, I already happened to be in a situation like that.
In January '05, I was shopping around for a 2005 Ford Mustang GT and all dealership I visited (7 or 8 of them) had mark ups of at least 5k, some even 10k (on a 25K car !!! Were they crazy or what ?). I finally found one with the color and options I wanted at MSRP and I bought her. If I couldn't have found one at MSRP, I would have bought an Acura TL (which was my choice at the time, after the new Mustang of course). And why is that ? To save 5 or 10k ? No, PURELY for a matter of principle.

[Legion681]

Originally Posted by Mike Penner

I never argued in favor of price fixing or against the "free market". The ONLY thing I am arguing is price gouging, dealer markups, or "letting the market run its course" (whatever you want to call it) is NOT good for DCX's bottom line. It costs them sales. Thats it, the whole extent of my argument. This isn't about what's good for the dealer or which economic model we should follow.

Heres my logic, if you see a fault please correct me. Both dealers reside in the same general area and sell over the same general timeframe.

Dealer #1 gets a 4 SRT allocation and marks it MSRP + $10000.

Dealer #2 gets a 4 SRT allocation and sells for MSRP.

Dealer #1 sells 2 out of 4 cars because it found two buyers willing to pay the 10k extra. Bravo. Meanwhile the other two cars languish on the lot.

Dealer #2 sells all 4 cars the moment they hit the showroom floor because the price appeals to a wider audience.

Dealer #1 is sitting on 2 cars that he can't move. Lets assume he doesn't drop the price (which may or may not be accurate).

Dealer #2 is waiting for his next SRT allocation and probably fending off customers who would buy on the spot.

Total cars sold: 6.

In a different scenario both dealer #1 and #2 sell for MSRP or thereabouts. Both sell out almost immediately.

Total cars sold: 8.

I know there are variables in there but this will be the overall trend, repeated nationwide. Basic math tells me 8 > 6. I don't think I need to do calculus or apply advanced economic theory to run the numbers. If you tell me you'd never get a circumstance where one dealer is selling for 10k over and another one nearby is selling for MSRP I'd say it sounds an awful lot like collusion (price fixing... a bad thing, your own words). After all, we are talking about the "free market" right? These guys are supposed to be able to set their own prices since they bought the cars from DCX directly (again your own words). If I'm completely off on this someone feel free to tell me how it really works.

I get the feeling the free marketeers (in any other argument I'd be one) are arguing from the point of view of what's best for the dealer. We all know whats best for the dealer. I'm saying it isn't best for DCX. I'll grant you there are genuine scarcity issues especially in the first year of the car so maybe during this period markups would be more appropriate. But the moment the supply catches up with demand the markups need to go, for DCX sake.

PS: Many thanks to Dan for that previous bit of info regarding CA cars. After some research it does indeed look like a CA native can buy a car from any state as long as it is 50 state smog legal. While I stand by my original assertions re: dealer markup effects on DCX bottom line the whole debate may be a moot point from the buyer's point of view. I was under the impression that a CA native had to buy within CA and that doesn't look to be the case. The moment you realize you can buy on a national level the rules of the game definately change.

I agree with you.