[LateBoomer]

Originally Posted by Joe C.

Car dealers depend upon LOYAL CUSTOMERS ..... So when they jack up the price of a car ten thousand dollars over MSRP, they are dissolving their customer base. Do you think that the customer will forget getting porked when times were tough? When and if things get back to "normal", do you think that the "loyal customer" will be that forgiving?
Before jacking up the price of a car, maybe the dealer should give up passing out the free doughnuts and coffee, hot dogs and pop corn. Maybe lay off a few salesmen too. They most likely are on commission, and would probably make more on unemployment.
Also, the "how was our service" surveys that include postage.... they could dump them too (at fifty cents postage for each one).

So all the reasons about the supply shortage and backup at ports just don't cut it for me.

I totally agree. I don't think I would ever shop at Jenkins in the future after the stunt they tried to pull on me. I will always shop elsewhere

[Number 10 GI]

Originally Posted by retiredguy123

I think it is shameful that car manufacturers have not developed a fair pricing system for their product, like almost every other product retailer.

GM tried that with Saturn and it didn't work out very well. Many buyers like to haggle when it comes to buying a car.

[ProfessorDave]

Please go back and take an economics course - or read Adam Smith. You know the terms "variable and fixed" - but you seem to be missing lots of the big picture. 1) Gauging is gauging. You can put lipstick on a pig - if you want to kiss it - be my guest. 2) If "information" is honest and available related to pricing - (which in the car industry - and frankly - the healthcare industry - it is not) - then there would not be as much opportunity to rip people off. 3) I teach my MBA students "there is no such thing as a commodity - there is always a way to differentiate - it may need some creativity and critical thinking. (Example: Comex is the most successful in concrete - and they are premium priced.)

[ProfessorDave]

Originally Posted by retiredguy123

My only point is that, when you go into most retail stores, customers expect to see a price that everyone pays. Americans tend to like and accept that pricing system. They don't want to argue with the Best Buy salesperson about the price for a television or the Publix cashier about the price of tomatoes. The advertised price is the price. I think that a similar pricing system for vehicles would be well received, if it were implemented fairly by the car manufacturers. If the current vehicle market has a shortage, why haven't the manufacturers adjusted the MSRP to account for it? They know how many fewer cars they are making. I suspect the reason is that they want the dealers to be better able to take advantage of customers who have no way to determine a fair price in a difficult market. Many people think that car dealers are dishonest, and they often feel intimidated and cheated by them.

Correct. The complexity of Finance Guy is fascinating - but the brilliance is in the simplicity. Auto pricing is mostly "blind" - similar to healthcare. Which is why they are both so messed up. If Finance Guy read Adam Smith (the "father" of capitalism) - the truth might blossom on the falsehood in his well stated but inaccurate argument. I teach over 1,000 MBA students each year; Finance Guy pontification is impressive - but would get a B- based on lack of critical thinking.

[Number 10 GI]

Originally Posted by Joe C.

Car dealers depend upon LOYAL CUSTOMERS ..... So when they jack up the price of a car ten thousand dollars over MSRP, they are dissolving their customer base. Do you think that the customer will forget getting porked when times were tough? When and if things get back to "normal", do you think that the "loyal customer" will be that forgiving?
Before jacking up the price of a car, maybe the dealer should give up passing out the free doughnuts and coffee, hot dogs and pop corn. Maybe lay off a few salesmen too. They most likely are on commission, and would probably make more on unemployment.
Also, the "how was our service" surveys that include postage.... they could dump them too (at fifty cents postage for each one).

So all the reasons about the supply shortage and backup at ports just don't cut it for me.

Have you been paying attention to the news lately? There are record numbers of ships waiting to be unloaded at California ports. The main problem with insufficient new cars being available is that there aren't enough computer chips for engine/vehicle management on-board computers. No computer, no go.

[Joe C.]

Originally Posted by Number 10 GI

Have you been paying attention to the news lately? There are record numbers of ships waiting to be unloaded at California ports. The main problem with insufficient new cars being available is that there aren't enough computer chips for engine/vehicle management on-board computers. No computer, no go.

No kidding? I know that they are out there, but there aren't a tremendous amount of cars on them. GM has shut down because of the chip shortage, but even they aren't on the ships.
I'm saying that it isn't a reason for the dealers to screw the customers, that's all.

[Number 10 GI]

Originally Posted by Joe C.

No kidding? I know that they are out there, but there aren't a tremendous amount of cars on them. GM has shut down because of the chip shortage, but even they aren't on the ships.
I'm saying that it isn't a reason for the dealers to screw the customers, that's all.

If people didn't buy new cars at the inflated prices dealers would have to sell like they always have.
Remember when the Mazda Miata and the Chrysler Cruiser first came out? They sold way over MSRP because vain people just had to be the first ones to own it and dealers took advantage of it.

[ProfessorDave]

Originally Posted by Number 10 GI

GM tried that with Saturn and it didn't work out very well. Many buyers like to haggle when it comes to buying a car.

Some love to haggle. Tesla has proven - not everybody loves to haggle.

[CoachKandSportsguy]

Originally Posted by ProfessorDave

Please go back and take an economics course - or read Adam Smith. You know the terms "variable and fixed" - but you seem to be missing lots of the big picture. 1) Gauging is gauging. You can put lipstick on a pig - if you want to kiss it - be my guest. 2) If "information" is honest and available related to pricing - (which in the car industry - and frankly - the healthcare industry - it is not) - then there would not be as much opportunity to rip people off. 3) I teach my MBA students "there is no such thing as a commodity - there is always a way to differentiate - it may need some creativity and critical thinking. (Example: Comex is the most successful in concrete - and they are premium priced.)

Professor, I built and modeled out various pricing models for the building construction industry on a quotes to build and quotes for service multi year contracts for multiproduct building systems, locally, nationally and for the federal government RFPs more than once. . . . one was an international datacom network bid to the IRS in the early 90's with both piece parts pricing and service based pricing. The construction quotes were mostly fixed price quotes, with parts and labor costs not visible. Federal government prices were designed to the RFP, though having to figure out max profit with different pricing inputs than our black box was the challenge. I have an idea of customized pricing since the models were all custom systems. I was not advocating commodity pricing, @retiredguy does not like the dispersion of pricing differences for the same car at different dealerships. I was challenging him on his desire to have a commodity or standardized pricing model. I may have used the term commodity pricing to mean that there is no differentiation between dealerships for the same car, which is what @retiredguy constantly thinks should happen, and is not the first time he has complained about that point. He constantly compares a consumer near commodity (better? since they are not identical but can be substituted for one another with minor differences) at best buy new with a highly configurable automobile with an age and wear factor.

So in normal times, conceptually, margins are competitive everywhere as the volume fluctuates around a competitive return for sellers. I think that having a large margin as clearly advertised with dwindling available units to sell to have to cover the commissions (variable) and fixed (lease, salaries, utilities) would result in a required higher margin to stay in business, are you disagreeing with this statement?

Thus, I don't think that pricing to survive is necessarily ripping off everyone, since no one has to buy that particular vehicle as clearly advertised.

finance guy

[retiredguy123]

Originally Posted by CoachKandSportsguy

Professor, I built and modeled out various pricing models for the building construction industry on a quotes to build and quotes for service multi year contracts for multiproduct building systems, locally, nationally and for the federal government RFPs more than once. . . . one was an international datacom network bid to the IRS in the early 90's with both piece parts pricing and service based pricing. The construction quotes were mostly fixed price quotes, with parts and labor costs not visible. Federal government prices were designed to the RFP, though having to figure out max profit with different pricing inputs than our black box was the challenge. I have an idea of customized pricing since the models were all custom systems. I was not advocating commodity pricing, @retiredguy does not like the dispersion of pricing differences for the same car at different dealerships. I was challenging him on his desire to have a commodity or standardized pricing model. I may have used the term commodity pricing to mean that there is no differentiation between dealerships for the same car, which is what @retiredguy constantly thinks should happen, and is not the first time he has complained about that point. He constantly compares a consumer near commodity (better? since they are not identical but can be substituted for one another with minor differences) at best buy new with a highly configurable automobile with an age and wear factor.

So in normal times, conceptually, margins are competitive everywhere as the volume fluctuates around a competitive return for sellers. I think that having a large margin as clearly advertised with dwindling available units to sell to have to cover the commissions (variable) and fixed (lease, salaries, utilities) would result in a required higher margin to stay in business, are you disagreeing with this statement?

Thus, I don't think that pricing to survive is necessarily ripping off everyone, since no one has to buy that particular vehicle as clearly advertised.

finance guy

To clarify, I have no problem with different prices at different dealerships. That is fair competition. My issue is that an uniformed or novice buyer will pay X dollars for a car. But, I, or another well informed and non-intimidated buyer can go into the same dealership and buy the same car for as much as $4,000 less. I have a problem with that.

[dewilson58]

To Clarify...

I have no problem with increased car prices, there is still value.

I have a problem with MBA's, there is no value.

[Wyseguy]

Originally Posted by SusanStCatherine

My husband looked at a new Hyundai yesterday. The dealer was asking $14,000 over MSRP - SMH

I wonder if people are actually paying these rates.

[Wyseguy]

Originally Posted by Marine1974

What is forgotten in what is mentioned in your economic analysis of car sales the 454 billion stimulus money for the car industry. Where did that go ?
This is the problem for the consumer when there is no supply and demand effecting the economics of car sales . Almost a 1/2 a trillion.

Government involvement in business during the pandemic has influenced all of the old equations we learned in grad school and life concerning rates and profits. The PPP's I filed and now the more recent ERTC all are tied to a specific percentage of lost business with current year sales vs 2019. These loans/grants are excluded from Federal Gross Income.

[Wyseguy]

Originally Posted by dewilson58

To Clarify...

I have no problem with increased car prices, there is still value.

I have a problem with MBA's, there is no value.

I think I resent that. In reality, when I graduated with one we did start 20 to 25% higher than someone with an undergrad degree. With the cost of a degree back in the 80's, that was enough to make it worth the cost. Today, I am not so sure. My undergrad degree cost 11,000.00 a year. My childrens' degrees cost 52,000.00 a year.