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Automakers can reduce dealer markings with one simple policy


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image: Zach Bowman / Jalopnik

Most dealers are experiencing a shortage of inventory and this has created a market where most new cars are sold for more than MSRP. We’ve already covered extreme price hole cases. While dealership franchise laws limit the leverage an automaker has to prevent this, there is a relatively simple solution if manufacturers are really serious about putting consumers first. head.

It is important to revisit this concept of MSRP, which is of course an acronym for Manufacturer Recommended Retail Price. “Recommended” is the key word here because while the automaker may “suggest” that the dealer sell for the price listed on the window sticker, we all remember a time when most Most cars will sell for less than that number because dealers need to compete with each other. For now, some dealers are ignoring that “hint” because supply and demand dynamics mean dealers can sell for more than the sticker price.

Despite these “hints” about the selling price of a car, automakers are well aware that extreme discounts are damage their brand. Different from some Powerful memo to dealers the majority of manufacturers threw their hands up and blamed those confusing franchise laws that basically said “We can’t tell our dealers what to do.”

While this is technically true, automakers could put in place a system that incentivizes dealers to sell their cars at fair prices. Manufacturers can tie the allocation of vehicles in future demand to the transaction prices of those currently for sale. In a nutshell, if a dealer wants more cars, they need to sell what they have at MSRP or better.

For example, if a Ford dealer wants more Broncos, they are allowed to sell their current Broncos at whatever price they like, but if the cars are marked, future Bronco allocations will be limited. . Of course, this will create a vicious cycle for that particular dealer’s customers if the store continues to sell with price spikes because their supply will be even lower. However, those customers can simply give their money to any other Ford dealer who chooses to sell Broncos at MSRP and thus get more cars.

While this isn’t a complicated policy, it would require the automaker to track transaction prices across hundreds of dealerships nationwide and then make adjustments to the attribution system. There should also be some fallback to prevent dealers from “selling” a vehicle to themselves at the MSRP and then reselling it on the used market for a premium.

What consumers need to realize, however, is that while you’re buying a car from a major automaker that sells through a franchised dealer network, you as the buyer are not really the brand’s customer. that… .is the agent. The factory that sells the car to the dealer will resell the car to you. Brands want to keep client happy, so while automakers can offer some minor services to minimize markup and maybe even send a stern memo, manufacturers are, for the most part, do not want to be involved in monitoring and enforcing these policies.

Unfortunately, resisting price increases will really depend on consumer behavior. There are dealers who are willing to forgo the market premium to play the long game and get a satisfied customer base, but this often means buyers have to wait for a factory order for a while. long time. There are also stores with stock ready to sell at reasonable prices, but this can mean customers overpaying for a car they “want.” and buy a car they “need”.

Tom McParland is a contributing writer for Jalopnik and runs AutomatchConsults.com. He has no trouble buying or renting a car. Have a car buying question? Send it to [email protected]

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