New Vehicle Markups Could Hurt Dealers And Brands, Says Research
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Vehicle markups are widespread, even amid improving vehicle inventory. While charging over MSRP may boost profits in the short term, there may be long-term consequences to the practice as well, according to new research.
In a recent report from Automotive News, which cites a survey from Gfk, 34 percent of car buyers paid vehicle markups for a new car last December, leaving a bad taste in the mouth of consumers.
Per senior vice president of consulting at Gfk, Julie Keener, who spoke during a webinar last month, brands are being negatively impacted by the practice of vehicle markups, even though brands do not have direct control over dealer pricing. As the survey indicates, 27 percent of customers who paid over MSRP said they would never buy that brand of vehicle again. What’s more, 31 percent of customers who purchased a vehicle over MSRP said they would advise other buyers to avoid the dealership, while 29 percent said they would never use that retailer for service.
According to Kenar, customers who paid sticker price tended not to have the same negative outlook as a customer paying vehicle markups. However, those customers that did pay over sticker tended to have a substantial increase in negative feelings. Paying over sticker price amid stabilizing vehicle inventory could also paint a negative picture.
The Gfk survey also indicated that some demographics paid more than others, with 43 percent of millennials charged over MSRP, the largest proportion of any age group studied. Nearly 50 percent of households earning more than $150,000 also shelled out extra for vehicle markups.
As GM Authority covered previously, a variety of GM dealers have charged well above sticker price for certain vehicles in the last few years, sometimes more than doubling the original MSRP. Popular models like the C8 Corvette, Cadillac Escalade, Cadillac Lyric, and GMC Hummer EV have all been listed with substantial vehicle markups, prompting GM to send a letter warning dealers not to engage in the practice of applying large market adjustment fees. According to GM, “any unethical sales practices or broker and activities that undermine the integrity of GM” or its brands would result in consequences, including rerouting allocation for popular models to different storefronts. However, in a recent GM Authority poll, 78 percent of poll respondents indicated that the warning did not fix the vehicle markups issues whatsoever.
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No offense, but does it really take a research team to reach this conclusion?
Corporate stupidity, so yes, it does take a research team.
The only people to blame for this mess is the consumer. If they didn’t pay the mark ups then the dealers wouldn’t be doing this, I get it that some people who needed a car or truck got screwed, but how many people needed a Escalade, Camaro, Corvette, Bronco, Mustang GT 500 and so on and so on. Just practice some patience. Also the banks should have never financed those marked up loans.
As a dealer I can tell you that most people I’ve dealt with over the past couple of years who have sought markup-worthy vehicles (Escalades, C8’s, Blackwings, Camaro ZL1’s, etc.) were only doing so with the intention of re-selling them. It’s like the Florida real estate bubble, and someone at the end is going to end up holding the bag. It’s frustrating as a retailer to try to distinguish between these speculators who are only buying from you because you have it (since they are usually the loudest and most connected voices in the room) and legitimate customers who you’d like to treat well and keep loyal to you.
Cole: Extremely good point. I have zero problem with GM (and others) forcing the buyer to sign a disclosure that doesn’t allow them to re-sell the car in under 6 months or 6,000 miles. And if they do, the warranty and anything on the car is lost. If I recall, GMA had an article about this a few months back and GM was doing this to stop the re-selling for profit.
I would encourage anyone shopping for a Chevrolet product to reach out to Cole at Genesis Chevrolet. I purchased a 2023 Corvette from them and was treated like gold, unlike local dealers in the Los Angeles area. Genesis Chevrolet will be my first choice when shopping for a new Chevrolet.
For reference, my Corvette was purchased for MSRP minus gm Card incentives. I also have a deposit for a Z06 at MSRP with Genesis.
Thanks Ray, glad to see you on here.
Your insights and dealer perspective are always appreciated Cole. I reached out to your dealership based upon your comments on this forum. Thank you for you kind treatment and continuous follow-up during my Corvette build and delivery. Others could learn from your example.
So dealership greed….is now the fault of “Car Flippers”….
I find it hard to believe you can’t tell the difference between someone who is a flipper and someone who really wants the car because they want it. Just talking to someone and maybe asking a few off the wall questions should be all that is needed. If dealers were as good at this skill as they are at ripping people off, it would not be a problem figuring out a flipper. But dealers have their priorities, and weeding out the flippers is not 1 of them.
Sometimes it is and most times it’s not, and unfortunately it’s definitely not as much of a priority for GM as it should be (they should have implemented the retention policy years ago on the Stingray at least). The flippers often know what you’re getting at when you start asking questions, and they know how to threaten with a nasty review if you don’t handle it right. Unfortunately even then you’ll probably still get one and if you don’t own your own small business it might be hard to understand how much damage that can do. Plus, the flippers aren’t always people you wish to tick off, they can be repeat customers (prior to the bubble), influential people, or friends of friends that you’ll see again (sometimes all of the above). Perhaps you can start to understand why it’s simply not worth the fight for us most often, but GM made a move in the right direction recently with the Z06 retention policy, hopefully they continue that on more vehicles.
I’m in the market for a new Colorado trail boss. What can I expect to pay? Still above msrp?
You have no idea the lengths these people will go or the BS they will shovel to try and convince the dealer that its a legit purchase and their forever car.
A guy went on the news to complain… He’s on the GM’s exporter list 3 times, got flagged twice on the same day. google the text below for the story.
$1 lien imposed by dealership barring Edmonton man from selling his own SUV
The vehicle he’s referring to was at lease the 3rd or 4th he had bought in just over a year. Its buyers like this who have people waiting over a year for vehicles up north.
This is kind of a “no SH*T” kind of story! I totally agree with Richard P, USA 1 and Left hand Luke above.
I can give two personal examples of this type of thing. Most recent with my 2023 Bolt EV. I’ve now purchased exactly 3 vehicles from this same Chevy store and they are really a nice place overall. The first (2020 Spark) was highly discounted but with some stupid window etch “anti-theft” thing that I didn’t want. But the price was so good that I didn’t worry about it. The second was a 2021 Malibu. That one they put the LoJack junk on it, but again the discount was too good to pass. The 3rd (Bolt EV) I had to pay MSRP plus the stupid $895 for the Lojack. Under no circumstances would they agree to not charge me for it. Since I special ordered the car, I even offered them $400 to NOT put it on. They said no. Although I still like this dealer, I can personally attest to the fact that the last purchase really left a bad taste in my mouth.
Lastly, way back in the late 80’s and early 90’s when I was was selling at the Buick, Cadillac GMC and Honda store, they used to always put those cheap plastic door edge guards and wheel opening moldings on the cars. Both were made of the same cheap plastic coated with fake chrome and they were held on with some type of adhesive. After a year or two, they would always begin to peal and fall off, which upset customers. For several years I constantly begged them to not put that junk on the cars as it looked badly on the brand and us. However, they liked the money more than the brand reputation. The funny thing is that they refused to put it on the Honda’s. Go figure.
Ha! I remember that tacky-looking chrome-colored trim that you could stick on car doors. I was guilty of doing that to my car too when I was young in the 1990’s.
I have been in the car business for 30 plus years. It amazes how people that get screwed by a dealer/salesman go back for a second and third dose. I have always treated people honestly and respectfully. About 10% of the people, I sell, appreciate it and won’t go anywhere else. The other 90% could care less. They don’t know the difference. Financially, I would have been better off being a rogue salesman. However, I sleep good every night and I never have to hide from a customer.
Richard: I’ve been in this business for 23 years now with the last 6 in the fleet department at the Volvo and Mazda store I’m at. It sounds like you and I have approached auto sales with the same demeanor. In my 40 years of driving, I’ve purchased a lot of cars, and seldom have I purchased from the same sales person due to lack of product knowledge or pulling some type of sales trick on me. Either that, or the sales people that I’ve purchased from and liked were normally not there when I went back. Of course, a good number of the vehicles I didn’t need a sales person due to buying through myself. In my example above, I’ve gone back to the Chevy store for my last 3 cars because I’ve found a sales person whom I trust and like. It’s too bad the dealership management has decided to push the Lojack onto every purchase as it’s given me reason to re-think buying from them next time.
What is this LoJack stuff you are talking about. My dealer added glass etching, paint protector, and fabric protector. Told them right out of the box that I would not pay for it, they said ok. This was 2019 when pricing was still good at almost 20% off MSRP for my wife’s Equinox Premier. The economy is so messed up now, those days may never return, sigh. But I am ready and will likely purchase a new Silverado and a new SUV, if the good times return.
Forgive me for this question, but doesn’t OnStar do the same thing as LoJack?
Yes but the dealer can make more off of LoJack.
Carl: LoJack is some stupid after-market “security system” that is garbage. I hate it and anything dealers add to cars. It’s the only thing added to my Bolt and I was not happy about it.
Dale: Yes, Onstar does the same basic thing and it’s built in. I told my dealer that and they said it’s not as good as LoJack. My A** it’s not. haha.
The worst thing to ever happen to the car business was Auto Groups. CEO’s only care about dollars. They don’t care about people, consumers or employees. They turn a blind eye to what goes on. They send in out of town managers and most are as rogue as them come. They know they’ll probably be gone in 12 to 18 months and it’s off to another town. These people will show no mercy. They’re professional strong arm con artists. They aren’t sales professionals at all. Quite honestly, they’ve turned the car business into a cesspool. The locally owned and operated dealership is becoming a thing of the past. The good men and women in the business are almost gone. It’s sad to see what it’s become. The car business use to be fun.
Unfortunately the consumer is to blame. Folks who are willing to pay over MSRP are killing the market. However, it is a free country and if someone is willing to pay an outrageous price for any given product, well so be it. I bought my 2022 C8 at MSRP. My ERay will be at MSRP as well. Cheers!
One dealer that I purchased from back in the 80’s said they had about 7% to play with on the sales price of the vehicle. I only paid MSPR once when I was a young, ignorant consumer. Never again. I will drive my present vehicle till the wheel fall off before I submit to their greed.
7% would be a strong margin on a new vehicle. Most are usually 3-5% or less at MSRP. If you aren’t willing to pay a 3-5% retail markup on a product, I hope you also never shop at Wal-Mart, Macy’s, Best Buy, Kroger, Nordstrom, Target, or any other retailer as you’re probably paying at least a 30% markup if not more. Even if you think you’re cutting around them buying buying at a factory store (Apple, Tesla, etc.), they’re still baking in that cost to sell the product, the only difference is they aren’t willing to negotiate any of their profit out. When you get those coupons in your email for “50% OFF!!” at some random retailer, that means that’s money they were making on the customers who paid full retail before. Notice that you never see ads for even just “10% off” new cars? Yeah there’s your proof.
GM was regularly running 15-20% off MSRP promotions from about 2014 until Covid. Usually the cars had to be on the lot for X number of days to qualify as a way to clear out older stock. I got almost 40% off my Lacrosse, and it truly was a once in a lifetime deal. The thought of paying MSRP is hard to swallow, as I’ve always been a deal hunter on cars, but paying a markup is a hard no from me. Lucky for me I’ve always been a fan of less popular models.
GM may do that, dealers (retailers) cannot. I’ve never seen an automotive manufacturer promotion for percentage off, it’s always been in the form of rebates which would be small increments amounting to at most low double digits in terms of percentage of MSRP.
What is an Eray?
Mucksiegooma,
An “E-Ray” is the very latest Sting-Ray with an electric motor, and they call it an “E-Ray”.
Ya think?!!! I won’t pay it. I will just keep driving what I have until things get back to normal and my long time dealer (purchased 4 new vehicles from) is off the list for future purchases (truck and car).
In September of last year I tried to replace my wife’s Traverse with a 2023 model in High Country trim. An Atlanta dealer that I had bought from before had the car I wanted but priced it at $5,600 over invoice. I contacted a small town dealer in South Georgia who offered to order the vehicle and sell it to me at MSRP. He also gave me more for my trade. I also ended up buying a 2023 Tahoe with no markup and a great offer on my trade in. Both were ordered and came in in 8 weeks. My brother in law needed a new Tahoe and I sent him to the same South Georgia Dealer. My son, who lives in Atlanta, bought a Trailblazer from the same dealer.
I’ve told probably 100 friends that I’ll never walk on a big dealer’s lot again.
The article says dealers have been warned not to charge customers above the MSRP. I called up the toll free GM customer service number about dealers charging above the MSRP, and the representative told me dealers are allowed to set their own prices depending on market conditions and the specific model, and the manufacturer has no direct control over what a dealer can charge. For example, the Equinox currently has a $1500 discount, while the Trailblazer has a $1000 or more markup. It’s like the old saying: it’s not illegal but it’s not ethical.”
Dealers in Las Vegas are charging $1000.00 in doc fees on top of Market adjustments and sometimes 10k in dealer add on’s. After a year and a half I found a dealer in Southern California who sold me the same vehicle for MSRP, and no dealer add on’s, and the doc fee was $80.00. Granted I had to pay Calif sales tax of 9% vs 8.38% in Nevada but because I purchased the vehicle in California I don’t have to pay Nevada sales tax.
There’s a sucker born every day. Take a deep breath and wait this one out. Inventories will increase, dealers will discount, manufacturers will incentivize and all will be back to normal. A consumer feeding frenzy is around the corner when those new unsold EV’s come pouring in.
GM dealers have screwed me enough so I just ordered a new Ford F-250. The ford family discount is much better than what GM wants me to pay for a compatible Silverado.
Mary. That is how you make ‘ex customers for life’
good luck with the FORD. I have not heard good things about them.
Reality is, If you Look at the Monroney Sticker and see Ridiculous Dealer Markups as well as the MSRP, and still buy the vehicle, the Jokes on YOU. It was our Decision, no one else’s. Sometimes Common Sense doesn’t strike until you leave the Dealership.
GM has sat back and watched their dealerships charge crazy markups on their most popular models. It’s disgusting trying to deal with all these greedy Chevy dealers. Charging upwards of $100000 on fully optioned Z06s. I’ve called nearly a dozen dealers inquiring about 2025/2026 z06, and none except ciocca (all their allocations are filled for the next few years) were selling at msrp.
Hendricks Chevrolet is selling a non z07 z06 for $200000. It was originally listed for $229000 but nobody is biting. Dealer markups should be abolished but I guess GM doesn’t mind it.