Price Gouging

[Chloe_21]

I ordered a Denali with the premium package and diesel on Saturday. I suddenly don’t feel so bad with my 79,200 price. Now let’s just hope It actually gets built.

You won’t get it for 21, most likely a 22; there is no advanced technology package available. I was just informed of this two days ago after waiting 7 1/2 weeks for my Denali premium package to be picked up.

 

[Chloe_21]

This has been interesting. It seems some people here are confusing General Motors and the dealerships. The dealers are independent, only affiliated with GM through a franchise agreement. Dealers, like other franchised businesses, buy a vehicle from GM at a certain fixed price. They can then charge whatever they choose for a sale price.

We, the consumer can then vote with our dollars. But GM has no control over the sale price of vehicles except for a MAP price. And GM makes no extra money on higher “market pricing”. They would actually have to raise the price to the dealer.

Kind of wish there was a way to go to GM themselves and buy the vehicle from them. Or order one. that would solve a lot of problems because they’re the ones that do the pricing programs they’re going to honor themselves. =P

 

[garymyman]

***** getting into office and China wanting to push the EV market. Therefor high gas prices and china(my opinion

I don't come to this board to read political conspiracy theories. Especially ones that don't make any sense. The chip shortage is affecting computers, video game systems, and a host of other products that have nothing to do with automobiles.

 

[Quark]

I don't come to this board to read political conspiracy theories.

So skip it.

 

[Wwes]

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.


Sent from my iPhone using Tapatalk

The automakers book revenue at the time the vehicle is in delivery to a dealership at a contacted fixed price. It would be stupid for them to slow down production to maximize revenue, when their maximization of revenue when running full out.

It's the dealerships that are maximizing revenue right now (aka selling at MSRP/+)

This is a (very) temporary blip in the market.

 

[Rdr854]

Good point about when the OEMs book revenue. One other piece of the equation is the charge that has to be booked for manufacturer incentives to customers and dealers and the impact that has on profitability vs reducing production so that incentives become unnecessary.

Another point is that the heavy discounts that we have become accustomed to over the years have served to heavily devalue vehicles out of the starting gate. My Suburban with a $60K MSRP sold for $46K plus tags, taxes and dealer processing. In today’s environment, the best price will be $60K minimum plus tags,taxes and dealer processing - although less popular vehicles still have some dealer and manufacturer discounts (albeit, much less aggressive than in past years).

 

[SSGUNNER]

Yup, came across that in my search for a new ride. I’ve seen anywhere from 5k, 10k, 15k even up to 20k mark ups. IMHO, don’t blame the dealer, blame the idiots who actually pay those crazy mark ups!!
This past year with COVID, the chip shortage and everything else going on in the world, it’s not just the auto industry. I have a full time job and do real estate part time and the same thing is happening with home buyers. I’ve seen folks dishing out 130k out of pocket to seal the deal on an offer.
By the way, ended my search last week on a 2021 Tahoe RST!!! Loving it.

 

[SSGUNNER]

.

 

[Chloe_21]

Yup, came across that in my search for a new ride. I’ve seen anywhere from 5k, 10k, 15k even up to 20k mark ups. IMHO, don’t blame the dealer, blame the idiots who actually pay those crazy mark ups!!
This past year with COVID, the chip shortage and everything else going on in the world, it’s not just the auto industry. I have a full time job and do real estate part time and the same thing is happening with home buyers. I’ve seen folks dishing out 130k out of pocket to seal the deal on an offer.
By the way, ended my search last week on a 2021 Tahoe RST!!! Loving it.

What I think is weird is how they talked about the unemployment rates, how people were going to lose our homes and apartments and everything. But all of a sudden they have all this money to buy these brand new high-end vehicles? it makes no sense. Even the housing market is crazy; it’s hard to find homes.

 

[Quark]

What I think is weird is how they talked about the unemployment rates, how people were going to lose our homes and apartments and everything. But all of a sudden they have all this money to buy these brand new high-end vehicles? it makes no sense. Even the housing market is crazy; it’s hard to find homes.

They had to make it look worse than it was to get the last guy out and the old new guy in.

 

[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.


Sent from my iPhone using Tapatalk

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.