Mark ups

[Strokerswild]

The thing I can't wrap my head around is who is paying these markups everywhere that the market is so crazy? I find it hard to believe that the majority of car buying people are financially fluid such that they can just toss an extra $10K+ over list on a depreciating asset and not think twice.

I consider myself a car guy and all, but I also am brutally clinical when it comes to cars and what I pay for them.

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[Fastoldman]

I am an optimist because I believe the American consumer will dictate that inventories be expanded in the future, though not likely at levels of a few years back. Too many folks want a car now, are not patient and will pony up the cash when the desire hits. Surprisingly I think the performance minded buyer is often a bit more patient as they want a specific model or options and are willing to wait awhile. Fortunately for me that was my little secret to success as I practically all my customer's cars were ordered. The satisfaction level is always quite high and it can be quite a fun experience if the Salesperson keeps the buyer updated ( with both good or bad news ). I know most of the Dealerships ( in the Dealer Family I worked for ) are doing business as usual on orders, but some are struggling with lack of inventory. Since they do not churn Salespeople like many in the Industry, they are doing all they can to keep folks employed. Needless to say ordering is here to stay, likely at a lower level in the future, but it does have it's benefits.

I do find myself arguing a bit with Salespeople now who say things will never go back to the way they were, because even though I tell them stories of supply and demand in the 80s for fuel efficient cars and the on and off again rebate wars among Manufacturers they seem to want to ignore history ( but that is a concern with many folks today). Ford will plug along with supplies based on lack of materials for awhile , but if GM or Stellantis get fired up or decide to go a different direction we will see everyone follow. For now, go order your machine, since the trade ins are quite high also, and many buyers are having " sticker shock " instead of viewing the difference they are paying. That is the real story a professional salesperson should be discussing, because the difference is what we are all paying yet I seldom hear it in a conversation.

Strokerswild - quick answer, using Ford as an example , if you want a Ford 3/4 Ton or 1 Ton the wait can be 9 months to a year , and this is based on large truck stores and the inventory they are allotted by Ford. No product , high demand, and insanely long waits is causing much of the bump in prices.

 

[theruleslawyer]

I think things never going back is up in the air.

• We have yet to see customer tolerance for waiting in a non constrained market
• We don’t know how short order times can be, but 4-6 week’s minimum looks practical with just production and transportation
• Some buyers need a car today
• A lot of people I know can’t visualize anything and would be deeply uncomfortable making a purchase they can’t see
• The market itself might change a lot with EVs coming for sure
• Self driving cars are on the horizon which will be an even larger market disruption
• 
  If I were ford and wanted it to work, id be looking into regional depots where ‘preconfigured’ cars could be staged. That way dealers could share a pool of inventory and get a car to someone in a week or replace a lot car. The business model on how inventory cost is carried would have to change a bit, but it would give a happy medium of lower inventory overall and ability to respond to customers with low wait tolerance.

 

[NJMike]

The thing I can't wrap my head around is who is paying these markups everywhere that the market is so crazy? I find it hard to believe that the majority of car buying people are financially fluid such that they can just toss an extra $10K+ over list on a depreciating asset and not think twice.

I consider myself a car guy and all, but I also am brutally clinical when it comes to cars and what I pay for them.

I agree with this line of thinking but then I discuss these things with sons, both working for car dealers right now. One exclusively sells used vehicles, the other at a Ford dealer for both new/used.
People are coming in for a Bronco for example and being told "its sticker + $10,000" and the banks are willing to lend, so people are signing for it. One instance he told me about was a woman who refused to pay the ADM said "I can go to ______ and they'll sell me the same car for less...Go ahead but you'll be back" She went to the other dealer and the car was gone. She came back and the one he tried to convince her to buy was also gone. People are paying which is exacerbating the problem.

EDIT - I ordered my Mach through Chapman at 3% off invoice. I asked my son if they could that deal and Id be happy to order with them. NOPE. Even better they got allocation for 2 GT500's like 2-3 weeks ago. He called me and said "I can order the heritage edition for you at $5000 over sticker" told him "I will never pay over sticker for a car"

 

[shogun32]

but we will see some Dealers go belly up this time around because they do not have the inventory to keep the doors open.

then the solution is to march on DC and lay it to waste. They absolutely caused this.

gouging your fellow man is not how the baker or grocery store or gas station (hmm) does it. Why is it permissible for the auto industry to do it? Did Home Depot levy a 10-15% premium on all products to keep their associates employed? No. they fired them or took in the shorts on profits, or went begging to the USG for handouts. What, dealers didn't dip into the bailout funds? In many ways car dealers are economic parasites. The sales team is just there as a skim, just like bankers. Why shouldn't the size of the sales staff not reflect the foot traffic and/or product available for sale on the lot? What's the economic justification keeping barely useful people on the payroll when they are unable to do their job?

When Kellog runs low on corn they might change the packaging in the box (box inflation) but it's aboveboard. It's one thing if Ford jacked the prices 10% and the dealer was passing it on. But no, the dealer paid dealer cost based on a 'set' MSRP and then adding their own 10+% markup.

It has to be said it's nuts that new cars are cheaper than used.

 

[blitzburgh]

ADM is there because people pay it. Stop paying it and they wont be able to tack it on. I know many brands have started doing it but Ford dealers have been leading that charge for years.

No ADM on the M2 I bought after having 5 mustangs and zero regret. Im glad the Ford dealer told me the Mach 1 is "Special" and of course will have 15k ADM lol GO F YOURSELF

 

[shogun32]

Some buyers need a car today

short of commercial, nobody needs a new car and there are plenty of vehicles out there. Priced all out of whack, absolutely. but even among the 3rd-rate used shysters one can find a conveyance at a (barely) tolerable price point.

 

[shogun32]

but having been in the business for years

ok, what's TRUE dealer margin?
We know 4% below invoice is still making money. Is it 8% below invoice where the hard limit is? Obviously it depends a bit on kickbacks indexed to units moved and product mix, and cost of business (prop tax, business tax).

 

[Zelek]

I complained about my order getting canceled and having to pay actual MSRP for my car and now I look at it and MSRP is considered a blessing. The times we live in now...

 

[shogun32]

People are paying which is exacerbating the problem.

no they aren't. as you wrote 2 sentences back, BANKS are financing the lunacy. It's ALWAYS the damn banks doing STUPID shit and eventually blowing sky high.

Loans for durable consumer goods with a 15-20% first year depreciation schedule should NEVER be financed more than 90% LTV. If the consumer has to pony up 10% cash AND the ADM, this nonsense would stop immediately.

 

[theruleslawyer]

short of commercial, nobody needs a new car and there are plenty of vehicles out there. Priced all out of whack, absolutely. but even among the 3rd-rate used shysters one can find a conveyance at a (barely) tolerable price point.

So dealers should surrender that entire market to the used market? Im talking about people who had things like a total loss in a collision. If I had a pretty new car, especially under typical lease age Id be annoyed to be pawned off on the used market. Getting something under lease age is rough and you likely won’t find the particular configuration you want.

 

[shogun32]

f I had a pretty new car, especially under typical lease age Id be annoyed to be pawned off on the used market.

then have a chat with your insurance company. they're not ponying up for the ADM are they? Maybe the insurance companies should have a sit down with dealers and have a 'total loss' certificate program that stipulates no participating dealer can sell for over MSRP if it's an insurance-involved need?

It's YOUR choice to buy new again or go used. Dealer has nothing to do with it, aside from trying to convince you to buy from them instead of someone else. And therefore they have an incentive to knock off the ADM. The profit margin they make at a MSRP or Invoice sale on that unit is no different than it was back in 2019.

 

[davtpa]

Had the same issue here, they had a Mach 1 on the show room floor in Grabber Yellow marked up $10k they said they would be willing to sell me. I already turned them down on ordering a GT500 because of the $10k mark up, I wasn't going to pay over sticker on any new car. From what I can tell that car still sits on the show room floor.

I had to laugh. There’s an FJG that the local dealer had priced up 10k. They smartly took it to the state fair and someone brought it. The black 6M that came before it still sits on the lot with the 10k ADM and will for quite some time.

 

[theruleslawyer]

then have a chat with your insurance company. they're not ponying up for the ADM are they? Maybe the insurance companies should have a sit down with dealers and have a 'total loss' certificate program that stipulates no participating dealer can sell for over MSRP if it's an insurance-involved need?

It's YOUR choice to buy new again or go used. Dealer has nothing to do with it, aside from trying to convince you to buy from them instead of someone else. And therefore they have an incentive to knock off the ADM. The profit margin they make at a MSRP or Invoice sale on that unit is no different than it was back in 2019.

ah. The post you responded to was talking future market state. This nonsense won’t last. Yah losing a car right now would suck. With rare exceptions insurance won’t cover a new car. I do wonder what happens with those one that advertise new car replacement?

 

[shogun32]

I do wonder what happens with those one that advertise new car replacement?

AFAIK they will write a check for whatever the sticker MSRP was for your busted up ride. Some *might* pony for today's revised (higher) MSRP for the same equipment. But acquisition costs (aka ADM) for sure doesn't get factored in.

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