Price Gouging

[Dashaunstaymad]

I stopped by a GMC dealer in Northern Virginia to look at a Yukon XL. The dealer only had Denalis and one AT4. While I understand that there is a shortage of new cars, I thought that a $15,000 market adjustment was ridiculous. I get that dealers are getting short on inventory and that a reduction in incentives and discounts is reasonable based upon supply and demand. But adding $15,000 for the privilege of buying a vehicle is just plain wrong.

As an aside, my Chevy dealer said that OEMs have taken notice that vehicle transaction prices have increased substantially with limited manufacturer incentives and that we should not expect inventory levels to return to the overstocked levels that we have seen for the past 30 years or so. He predicts that there will be more special ordering in the future, which will significantly reduce the need for dealer discounts and manufacturer incentives.

 

[Dashaunstaymad]

I went to purchase a 2021 Tahoe RST and noticed several dealers marking up the price 5-10k over sticker. This seems illegal, I noticed some dealers were discounting them with the employee pricing up north. I hope they feel the wrath of what they’re doing to customers. I may go with an Infiniti to teach them a lesson.

 

[Stbentoak]

As an aside, my Chevy dealer said that OEMs have taken notice that vehicle transaction prices have increased substantially with limited manufacturer incentives and that we should not expect inventory levels to return to the overstocked levels that we have seen for the past 30 years or so. He predicts that there will be more special ordering in the future, which will significantly reduce the need for dealer discounts and manufacturer incentives.

I said this a few months ago and was roundly foo fooed, and that soon vehicle lots would flooded with choices and 5-10K discounts again... Still believe that? I don't and think MSRP { or above} or Highway will be the future standard on these vehicles...

 

[garymyman]

I said this a few months ago and was roundly foo fooed

I'm still, respectfully, foo fooing this prediction. I think dealers and stock holders (not to mention UAW!) will mutiny if GM artificially holds back production. Or tries to limit to custom orders. Dealers want full lots. Empty lots make it look like a dealer is going under. There are plenty of people who cross shop with other brands and buy that day. if I go shopping for a "big SUV" and the Ford dealer has every option and color I want on the lot, but my GMC store tells me I can come inside, sit down & order one, and it'll show up in 10 weeks, give or take... plenty of people will just shrug and buy the Ford.

We might be a long way from having $10,000 to 15k on the hood like it was just 2 years ago, but the chip shortage can only last so long.

 

[91RS]

GM will not be the only one doing this though. The shareholders won’t care, they’re making at least the same money selling less cars.

 

[91RS]

Ford Moving toward Build-to-Order, Away from Packed Dealer Lots

'I know we're wasting money on incentives,' says CEO Jim Farley, acknowledging the way people buy cars and trucks is changing.

www.caranddriver.com

 

[TollKeeper]

As an aside, my Chevy dealer said that OEMs have taken notice that vehicle transaction prices have increased substantially with limited manufacturer incentives and that we should not expect inventory levels to return to the overstocked levels that we have seen for the past 30 years or so. He predicts that there will be more special ordering in the future, which will significantly reduce the need for dealer discounts and manufacturer incentives.

I said this a few months ago and was roundly foo fooed, and that soon vehicle lots would flooded with choices and 5-10K discounts again... Still believe that? I don't and think MSRP { or above} or Highway will be the future standard on these vehicles...

Ford has said they will NOT go back to the old ways.

Moving forward, all vehicles will be built to order, aside from the vehicles on showroom floors.

Edit: Someone already beat me to the link..

 

[Stbentoak]

GM will not be the only one doing this though. The shareholders won’t care, they’re making at least the same money selling less cars.

With Less overtime and possibly less shifts. Overtime is a profit buster. All will adopt this model if it proves out….The thing that will make it most attractive is short leadtimes of 8 weeks or less. People will wait, unless they totaled one out.
As far as ordering wild combinations, I’m pretty sure they will throttle that. Makes the line flow smoother….

 

[jayoco]

I'm still, respectfully, foo fooing this prediction. I think dealers and stock holders (not to mention UAW!) will mutiny if GM artificially holds back production. Or tries to limit to custom orders. Dealers want full lots. Empty lots make it look like a dealer is going under. There are plenty of people who cross shop with other brands and buy that day. if I go shopping for a "big SUV" and the Ford dealer has every option and color I want on the lot, but my GMC store tells me I can come inside, sit down & order one, and it'll show up in 10 weeks, give or take... plenty of people will just shrug and buy the Ford.

We might be a long way from having $10,000 to 15k on the hood like it was just 2 years ago, but the chip shortage can only last so long.

Bingo!! Don't ever forget (and I say this loving my Denali)... GM is pension company masquerading as a car company. As such, they need to move as many units as possible.

 

[jayoco]

Not if the factories continue to constrain supply.

Let’s say an automaker can sell 10 SUV’s at full boat sticker (never mind the dealers adding on extra costs) or 15 at a average 10% discount. Never mind bigger incentives for some of these models in the past. Of the 15, they are only getting paid for 13.5 of them. At 70k a pop that’s 157k in discounts. It’s costing them. The question is which would you chose.

700,000 in revenue for 10 at full price with 2/3 the material and labor costs?

Or 945,000 in revenue for 15 discounted ones? With full material and labor costs?

I think the automakers are by far realizing the first scenario is more profitable and will adjust production accordingly.

Just my .02 of a dollar.

There used to be a theory that dealers give away new cars at invoice and make their money on the trades and service. I think that they have figured out they can actually make money on the cars themselves.


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Here's how the math works for GM: I can sell 100,000 Tahoe/Yukons for a $15000 profit per unit. 1.5B in profit. OR...they can get their dealers sales staff to push buyers into buying 150,000 units at $12000 profit per unit. 1.8B in profit. Remember...the dealer eats profit too. GM does NOT want to constrain supply. It's much more profitable to have 90 to 120 days in inventory with thousands of dealer salespeople trying to sell a unit.