Car prices and sales models

[mikeavelli]

Any Lexus dealers doing ADM? Many Toyota dealers can't help themselves.
View attachment 5217

i heard this is to prevent it from being sold. No one is that crazy… lol

 

[IS-SV]

i heard this is to prevent it from being sold. No one is that crazy… lol

Lol, just another lie to mask unethical, predatory, cheating, stealership behaviors that degrade the brand in the end.

 

[mmcartalk]

Lol, just another lie to mask unethical, predatory, cheating, stealership behaviors that degrade the brand in the end.

I agree that an ADM like that, at least IMO, is an insult to human intelligence, but the real problem is simply not enough new vehicles in stock for the current level of demand...an economy recovering from 18 months of pandemic. It's basically the oldest law of Economics (at least until Karl Marx came along).....Less-supply and more-demand=higher prices, while more-supply and less-demand= lower prices.

BTW, dealerships in my area, despite there still being somewhat of a shortage of vehicles, are now selling most (though not all) of their new-vehicle stock at MSRP, which, though not ideal for consumers, at least does not exceed what the manufacturer itself thinks they are worth.

 

[IS-SV]

I agree that an ADM like that, at least IMO, is an insult to human intelligence, but the real problem is simply not enough new vehicles in stock for the current level of demand...an economy recovering from 18 months of pandemic. It's basically the oldest law of Economics (at least until Karl Marx came along).....Less-supply and more-demand=higher prices, while more-supply and less-demand= lower prices.

Unfortunately ADM occurred frequently even when supply/demand was in balance. (ADM being example of unethical, predatory, cheating, stealership behaviors that degrade the brand in the end). The "real problem" is just another excuse to justify behaviors started well before todays tight supply situation.

 

[NXracer]

^ I beg to differ (having real experience in automotive industry) and very familiar with CarMax and Tesla. Not true, Tesla prices on volume models 3 and Y have NOT increased to same degree as Additional Dealer Markups at traditional franchised dealerships.

Tesla Volume model pricing have gone up 23% on the 3 from the start of 2021 and 20% on the Y? Is anyone in the industry expecting Tesla to become cheaper once the supply issues normalize in the future?

 

[IS-SV]

Tesla Volume model pricing have gone up 23% on the 3 from the start of 2021 and 20% on the Y? Is anyone in the industry expecting Tesla to become cheaper once the supply issues normalize in the future?

Yes, with acceptable automotive gross margins now. Teslas are sold for MSRP, exactly as shown on website. No price reductions expected anytime soon, none needed. Tesla customers are not complaining that vehicles are overpriced, given performance, safety, range, charging infrastructure versus competition.

 

[NXracer]

Yes, with acceptable automotive gross margins now. Teslas are sold for MSRP, exactly as shown on website. No price reductions expected anytime soon, none needed. Tesla customers are not complaining that vehicles are overpriced, given performance, safety, range, charging infrastructure versus competition.

So why are dealer ADMs bad then? Instead of individual dealers setting the markups on products, the mfg is doing it across the board and just changing the name to "MSRP"

 

[IS-SV]

So why are dealer ADMs bad then? Instead of individual dealers setting the markups on products, the mfg is doing it across the board and just changing the name to "MSRP"

Just an opinion, it's okay if you like ADM's. I just dislike when ADM's are used in a predatory/unethical manner. Yes, I prefer that the manufacturer sets the price and everybody pays the exact same price (MSRP).

Glad somebody likes the traditional dealership time consuming experience, your choice in the end.

 

[NXracer]

Just an opinion, it's okay if you like ADM's. I just dislike when ADM's are used in a predatory/unethical manner. Yes, I prefer that the manufacturer sets the price and everybody pays the exact same price (MSRP).

Glad somebody likes the traditional dealership time consuming experience, your choice in the end.

I dislike information asymmetry and companies trying to change words to appear as though they are doing "better" then the status quo. With industry insiders like yourself posting insight, I am trying to understand as a consumer how exactly these new business models and practices benefit the end consumer (unlike the benefits to the business which are easily visible).

 

[mmcartalk]

Yes, with acceptable automotive gross margins now. Teslas are sold for MSRP, exactly as shown on website. No price reductions expected anytime soon, none needed. Tesla customers are not complaining that vehicles are overpriced, given performance, safety, range, charging infrastructure versus competition.

That's true to some extent, but it also begs the question, at least as I see it (and I respect your view if you disagree wth me) that the Tesla brand has become so much of a cult that some people would mortgage their house to get into one, and not complain. And, even apart from the vehicles themselves, look how zealous investors have driven up the company's stock price by so much demand for it.

 

[IS-SV]

That's true to some extent, but it also begs the question, at least as I see it (and I respect your view if you disagree wth me) that the Tesla brand has become so much of a cult that some people would mortgage their house to get into one, and not complain. And, even apart from the vehicles themselves, look how zealous investors have driven up the company's stock price by so much demand for it.

Yes, but Tesla does not depend on those cult-following/zealots for a majority of its revenue. Practical people like us make up a majority of the buyers. Stock price is another topic, but to your point the stock is way ahead of its skis as they say. It's a story stock with sex appeal.

 

[IS-SV]

I dislike information asymmetry and companies trying to change words to appear as though they are doing "better" then the status quo. With industry insiders like yourself posting insight, I am trying to understand as a consumer how exactly these new business models and practices benefit the end consumer (unlike the benefits to the business which are easily visible).

Agreed business results (financials) of US public automotive companies are readily available.

Are you asking what are the benefits to the consumer of these direct sales/fixed price automotive business models? (Most are fairly obvious.)

 

[NXracer]

Agreed business results (financials) of US public automotive companies are readily available.

Are you asking what are the benefits to the consumer of these direct sales/fixed price automotive business models? (Most are fairly obvious.)

Yes. In the long term I don't see how consumers will benefit with direct sales/fixed priced automotive models.

1) Why would mfgs want to pass to the end consumer any costs savings they gain from removing the current franchise model?
2) If a customer has to pay 20% more to get the same product without the treachery and thievery of current bad actors has the customer really gained anything?

@mods If my posts have strayed too far from topic please let me know! Thanks/Sorry

 

[IS-SV]

Yes. In the long term I don't see how consumers will benefit with direct sales/fixed priced automotive models.

1) Why would mfgs want to pass to the end consumer any costs savings they gain from removing the current franchise model?
2) If a customer has to pay 20% more to get the same product without the treachery and thievery of current bad actors has the customer really gained anything?

@mods If my posts have strayed too far from topic please let me know! Thanks/Sorry

@mods, As it relates to topic, it's my fault for stating that Tesla buyers are getting a car at exactly MSRP and trading in their car at unusually high trade in values due to the "used car prices being at high time high". Buyers know it though.

To address the question about benefits to the consumer of direct sales/fixed pricing.
1. Nobody said manufacturers incur any cost savings due to direct sales, therefore nothing to pass on to consumer.
2. No evidence that Teslas are 20% overpriced when compared to the premium cars/SUVs they compete with. But to your point batteries are expensive, certainly more expensive than compliance 4 banger turbo gas drivetrains so common in the competing vehicles. And btw ADMs on desirable cars are often way more that 20%.
So some benefits to consumers of the Tesla direct sale model (not to say all aspects of the direct sales model are positive because that's not the case):
. Everybody pays exact same price (before tax and registration)
. Price seen on website is price paid, period.
. Those with weak negotiation skills are not victimized
. No dealing with commissioned sales people
. 15-30 minutes to order car, not 2-4 hours wasted at dealership
. Transparency with financing, (without predatory practices that still legal in automotive but not other forms of consumer lending, thanks to powerful lobbyists)
. Lower rates of depreciation compared to the other premium brands
. No high profit crap upsells of extended warranties, paint treatment packages, interior treatment packages, GAP insurance, etc).

But I understand you don't see the long term benefit to consumers, your opinion should be respected.
I'm just offering my opinion as both an automotive industry insider and outsider/consumer.

 

[mmcartalk]

. 15-30 minutes to order car, not 2-4 hours wasted at dealership

The problem is, Steve, that, with most of today's vehicles, when you are ordering, if you really want to know what you are getting, in detail, it takes longer than 15-30 minutes, on the web-site/Build-Your-Own features, to simply examine the pricing, standard-equipment-list, drivetrain options, package-options, stand-alone-options, available accessories, and all of the rest of the data before you even can decide what version and Package you want you want. Then, once you decide what you actually want (and it is available that way), then you can start the actual process of ordering.

And that's simply because of the staggering amount of equipment that is standard or optional in today's vehicles....there by government-regulations, customer-demands for convenience, and the tendency/necessity of automakers to sometimes try and one-up each other.

 

[IS-SV]

The problem is, Steve, that, with most of today's vehicles, when you are ordering, if you really want to know what you are getting, in detail, it takes longer than 15-30 minutes, on the web-site/Build-Your-Own features, to simply examine the pricing, standard-equipment-list, drivetrain options, package-options, stand-alone-options, available accessories, and all of the rest of the data before you even can decide what version and Package you want you want. Then, once you decide what you actually want (and it is available that way), then you can start the actual process of ordering.

And that's simply because of the staggering amount of equipment that is standard or optional in today's vehicles....there by government-regulations, customer-demands for convenience, and the tendency/necessity of automakers to sometimes try and one-up each other.

^ And none of that applies to the direct sales example (Tesla) that I provided.

But traditional automakers with all their ordering complexities would have difficulty with current configurations going to direct sales model, good point. And after adding package upon package, price really gets jacked up too (likely the goal). Short answer, reconfigure.
Note: We’ve drifted off ”high used car price” topic a bit, my fault as stated above.

 

[mmcartalk]

^
Note: We’ve drifted off ”high used car price” topic a bit, my fault as stated above.

Don't worry about it......I've done it many times myself.

 

[Tragic Bronson]

@mods, As it relates to topic, it's my fault for stating that Tesla buyers are getting a car at exactly MSRP and trading in their car at unusually high trade in values due to the "used car prices being at high time high". Buyers know it though.

I remember Scion's Pure Pricing and Saturn...price you see is price you pay.

 

[IS-SV]

I remember Scion's Pure Pricing and were Scions were sold at Toyota franchised dealerships.

Yes, I remember that, although those Scions were sold through franchised Toyota dealerships. (I bought an Xb for a family member that just graduated from surgical tech schooling). The process was simple and fast (pricing as advertised, option list streamlined, standard equipment generous at that price point, kinda like ordering a vehicle at a Tesla store in 2021)

 

[MichaelL]

@mods, As it relates to topic, it's my fault for stating that Tesla buyers are getting a car at exactly MSRP and trading in their car at unusually high trade in values due to the "used car prices being at high time high". Buyers know it though.

To address the question about benefits to the consumer of direct sales/fixed pricing.
1. Nobody said manufacturers incur any cost savings due to direct sales, therefore nothing to pass on to consumer.
2. No evidence that Teslas are 20% overpriced when compared to the premium cars/SUVs they compete with. But to your point batteries are expensive, certainly more expensive than compliance 4 banger turbo gas drivetrains so common in the competing vehicles. And btw ADMs on desirable cars are often way more that 20%.
So some benefits to consumers of the Tesla direct sale model (not to say all aspects of the direct sales model are positive because that's not the case):
. Everybody pays exact same price (before tax and registration)
. Price seen on website is price paid, period.
. Those with weak negotiation skills are not victimized
. No dealing with commissioned sales people
. 15-30 minutes to order car, not 2-4 hours wasted at dealership
. Transparency with financing, (without predatory practices that still legal in automotive but not other forms of consumer lending, thanks to powerful lobbyists)
. Lower rates of depreciation compared to the other premium brands
. No high profit crap upsells of extended warranties, paint treatment packages, interior treatment packages, GAP insurance, etc).

But I understand you don't see the long term benefit to consumers, your opinion should be respected.
I'm just offering my opinion as both an automotive industry insider and outsider/consumer.

How can you say that manufactures don’t incur cost savings with a direct sales model? The manufacturer doesn’t have to sell the car to a dealer at a lower price (wholesale) and then miss out on the benefit of selling to the consumer at MSRP. This margin the dealer makes, not the manufacturer. If you do direct sales you sell at MSRP and keep the full margin from cost to make the car to sales price, not cost to make the car to invoice price, the price you sell the car to the dealer for which is less than MSRP.