Concerns about Surcharge

[mc137]

The one area I'd disagree with you is that dealers have never been more profitable. That may be true for some, but most are hurting in two areas. Used car sales are almost non-existent due to lack of inventory, and sales volume is lower for new cars due to lack of supply. That lack of supply is especially hurting "high volume, low margin" dealers who depend on sheer numbers to profit. When there are fewer cars to sell, they aren't coming out ahead.

Floor plan costs have never been lower. They are selling cars at the highest average prices in history they don't need to finance to have on the lot for purchase. The 'high volume, low margin' dealer model was organized around sales at invoice+. Each sale at MSRP+ is at least twice the profit, probably more like 3X.

It is true profitability from used car sales is probably hurting a lot because of inventory and high wholesale prices. Also, service is likely hurting because of severe parts availability which is devastating throughput.

But new car profitability? No, even with the inventory shortage. The shortage is real, to be sure, but they are making cars. Production is down something like 10%. A key issue is pent up demand.

 

[Chad86tsi]

Floor plan costs have never been lower. They are selling cars at the highest average prices in history they don't need to finance to have on the lot for purchase. The 'high volume, low margin' dealer model was organized around sales at invoice+. Each sale at MSRP+ is at least twice the profit, probably more like 3X.

It is true profitability from used car sales is probably hurting a lot because of inventory and high wholesale prices. Also, service is likely hurting because of severe parts availability which is devastating throughput.

But new car profitability? No, even with the inventory shortage. The shortage is real, to be sure, but they are making cars. Production is down something like 10%. A key issue is pent up demand.

It's like gasoline prices. They are quick to raise prices, and slow to drop them, even when markets correct quickly.

 

[Chad86tsi]

First of all, Ford and GMC both care about what their dealer does and actively worked to prevent surcharging on electric vehicle orders, and is successfully at it.

Ford Is Going After Dealers Caught Price-Gouging As EV Sales Boom

Ford CEO Jim Farley said 10 percent of Ford dealerships were caught price-gauging customers on new EVs like the popular Mustang Mach-E and F-150 Lighting.

www.motortrend.com

I'm curious what you mean about being successful. The MachE was gouged for 2 years, and ^here is Ford's CEO admitting he knew about it. He has a future plan to address it. Never mind the last two years... It's better than Genesis by a mile, I'm not saying otherwise, I'm just not holding Ford Innocent here.

 

[dklanecky]

It's like gasoline prices. They are quick to raise prices, and slow to drop them, even when markets correct quickly.

I don't think it's anything like gas prices, gas is a commodity, and will always have someone trying to sell more gallons at a lower cost, than their competitor and making up the difference in volume. Car dealers can't make it up in volume, at least not in today's economy.

 

[EdP]

I don't think it's anything like gas prices, gas is a commodity, and will always have someone trying to sell more gallons at a lower cost, than their competitor and making up the difference in volume. Car dealers can't make it up in volume, at least not in today's economy.

Not sure that holds true any more either. at least in this area. Six stations I pass frequently all have the same price. One day the Marathon station was 10 cents cheaper but a few hours later it was the same too.

Used to always be that one station that was a lot cheaper but have not seen it for a long time.

 

[Chad86tsi]

I don't think it's anything like gas prices, gas is a commodity, and will always have someone trying to sell more gallons at a lower cost, than their competitor and making up the difference in volume. Car dealers can't make it up in volume, at least not in today's economy.

Following the definition of the word commodity, a car is a commodity. It is subject to similar economic variables.

When gas supply tightened to the point of rations in the 70's, there was no motive to sell more and make up on volume because supply was not abundant (ordering more didn't mean you got more), instead there was just a price increase.

I think some models are seeing the volume/capacity rebound , but they won't tell you that while keeping prices high. Just like gas, the supply shock causes instant price hike and gradual price easing, always to the benefit of those selling. Price increase is in sync- sometimes instantly, and price easing always laggs sometimes by a lot.

 

[kqian111]

Dealers, yes. How are the manufacturers raking you over the coals? You did mention both.

Specifically referring to Tesla and their price increases this past year. They removed the middle man and in effect became the mfg and dealer.

 

[kqian111]

For those complaining about dealer markups over MSRP, remember the "normal" times when consumers hardly ever pay MSRP. We are accustomed to receiving discounts from MSRP with promotions from mfg and dealers alike. Most of those discounts are not fully advertised until you show up and negotiate.

You can't have it both ways and complain when the market forces turn against you and are forced to pay over MSRP. Capitalism can be a bitch sometimes.

 

[EdP]

For those complaining about dealer markups over MSRP, remember the "normal" times when consumers hardly ever pay MSRP. We are accustomed to receiving discounts from MSRP with promotions from mfg and dealers alike. Most of those discounts are not fully advertised until you show up and negotiate.

You can't have it both ways and complain when the market forces turn against you and are forced to pay over MSRP. Capitalism can be a bitch sometimes.

Neither can have the dealer in the long run. With a good discount I'd have a new car already at sticker, I'll keep what I have. Sticker plus? Not going to happen for me. We have choices.

 

[EdP]

Specifically referring to Tesla and their price increases this past year. They removed the middle man and in effect became the mfg and dealer.

Raking over the coals? Questionable. The price of bagels went up too. I posted about a TV series: Out Of Stock: Supply Chain Crisis Explains why prices are going up. Three episodes, very informative.

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[Looney100]

I quickly looked up some news on publicly-traded auto dealers. I don’t know how representative they are of dealerships, overall, but those that disclose earnings are putting up record numbers.

I don’t begrudge them, we’d all take similar advantage of a tight market if we were in their position.

 

[cnhart]

I reached out to all of the Genesis dealers in the Los Angeles area. May be of interest to other buyers in the region.

Here's where they stand with markups/mandatory add-ons:

Genesis of Cerritos: $2,345 for security/anti-theft system
Genesis Santa Monica: $2,485 for 'protection package' (dealer implied they have some wiggle room)
Genesis of South Bay: $4,997 in mandatory dealer add-ons
Genesis of Corona: $1,485 in mandatory dealer add-ons
Genesis of Glendale: No response. Tried several times.

 

[Looney100]

I reached out to all of the Genesis dealers in the Los Angeles area. May be of interest to other buyers in the region.

Here's where they stand with markups/mandatory add-ons:

Genesis of Cerritos: $2,345 for security/anti-theft system
Genesis Santa Monica: $2,485 for 'protection package' (dealer implied they have some wiggle room)
Genesis of South Bay: $4,997 in mandatory dealer add-ons
Genesis of Corona: $1,485 in mandatory dealer add-ons
Genesis of Glendale: No response. Tried several times.

"Mandatory add-ons" a nice way to reframe surcharges.
Such things would be considered anti-competitive 'tied selling' in Canada. I suspect the same is true under US law. Not sure how they are getting around this.

 

[Looney100]

Coincidently, I just had a friend tell me that he’s heard from two people recently that the cars that they placed deposits on had arrived, but that the dealers tacked on several thousands of dollars in fees that were not included in the original agreements. Dealers basically said “take it or leave it.” One even insisted that the buyer finance the vehicle - even though the buyer wanted to pay cash. It seems that the US dealer behavior is spilling across the border.

 

[Mcc]

I reached out to all of the Genesis dealers in the Los Angeles area. May be of interest to other buyers in the region.

Here's where they stand with markups/mandatory add-ons:

Genesis of Cerritos: $2,345 for security/anti-theft system
Genesis Santa Monica: $2,485 for 'protection package' (dealer implied they have some wiggle room)
Genesis of South Bay: $4,997 in mandatory dealer add-ons
Genesis of Corona: $1,485 in mandatory dealer add-ons
Genesis of Glendale: No response. Tried several times.

I would be curious to know what Genesis Westlake Village says.

 

[upa]

Coincidently, I just had a friend tell me that he’s heard from two people recently that the cars that they placed deposits on had arrived, but that the dealers tacked on several thousands of dollars in fees that were not included in the original agreements. Dealers basically said “take it or leave it.” One even insisted that the buyer finance the vehicle - even though the buyer wanted to pay cash. It seems that the US dealer behavior is spilling across the border.

Depending on your province's consumer protection laws It really doesn't matter what your dealer says. The dealer can ask for anything and can make it sound like there is no option but that does not necessarily make it true. Most provinces protection laws heavily protect truth in advertising, meaning if you advertise a car at certain price you have to follow through. This is easy to enforce with an ordered vehicle as the price is advertised on the manufacturer's website. Once it enters a dealer's general inventory it gets trickier because they can say they installed value added accessories such paint, upholstery protection, wheel locks, etc and the new price is whatever as a consequence. It doesn't mean you can't try and negotiate to get those charges removed but you no longer have threat of provincial law on your side.

 

[cnhart]

I would be curious to know what Genesis Westlake Village says.

Just spoke to them. They'll make a decision about markups, etc., once pricing is released.

 

[Mcc]

Just spoke to them. They'll make a decision about markups, etc., once pricing is released.

Makes sense.

So all these other dealers decided on their pricing before corporate pricing was released?

 

[cnhart]

Makes sense.

So all these other dealers decided on their pricing before corporate pricing was released?

They all have standard markups/add-ons across the range, it seems.

 

[pejorative]

I just had Santa Monica contact me to tell me they had a Black/Glacier performance if I wanted it. They were asking for $2500 for Ext/Int Protection and Etching (whatever that is). Originally they said $2500 then they said $1250... Either way I was told I would be able to purchase at MSRP. So I kindly thanked them and got a refund on my deposit... I don't begrudge them a profit in this market, just a bit disappointed at the "MSRP," but you need to buy needless dealer options.