Please, stop this madness!
It’s no secret that I am in the process of selling my 360 Modena for something more driveable; I just cant figure out quite what. In a recent conversation with some friends, the GT350 and GT350R came up. Now I am a life long Mustang fan, but the new 350 has some concerns for me, but I decided to follow up on the soon arriving GT350 anyways.
So I made my trip to the local dealer, and spoke to a friend of a friend who is a sales person at the dealer. We discussed options and ordering time frames etc. Finally, we got to prices. I had gone online prior to arriving and built out several 350's and 350R’s so I knew roughly what my net MSRP would be around.
As he was looking through his system he noticed that there was a GT350 that was spec’ed out close to what I would want to order, and was not a customer order, due to arrive mid-February. I asked him what the sticker was on it, and he said it was about $57,000 not including the dealer markup.
I asked what they were looking at for markup, to which he responded, of the 7 customer orders they had already taken, they were getting $20,000 over MSRP. I then asked if that was the same for the R. I was then told that for the R they were getting $50,000 over MSRP, and had used their allocations on the R (at least 3 on order, paid for already) for the next several months already, and that if I was interested in the 350, they would likely take an offer at maybe 18 to 19k over MSRP.
This is the problem.
Yes, these cars are rather limited production and something that only enthusiasts will want to get their hands on. But where do you think that extra 20k or 50k goes?
I can tell you. It lines the pockets of whomever owns the dealer. And they go out and buy the same car you just paid 185% of MSRP for at invoice with the extra cash you gave them. In the instance of this dealer, that’s $290,000 in straight profit, never mind the difference you also paid them between invoice and MSRP, on 10 vehicles... as a reference, the national average profit if sold for MSRP is around the $2,500 range (obviously not all vehicles are sold for MSRP, and there are other factors into that which drive profits).
This is no new process either. About a year ago when the new Z06's were hitting lots, the Chevy dealer was taking in $35,000 over MSRP. Before that when the C7 first hit lots they were taking $15,000 over MSRP for your base, non-limited production C7. When the Boss 302 was released they were taking $15,000 for the Boss, and $20,000 for the Laguna Seca.
I could continue but I think you see what I am getting at.
So why do dealers continue this practice? Because we, as consumers allow them to.
With Ford’s more recent announcement of the very limited 250 units globally per year on the new GT, and it’s prior success and following, I was concerned what markups would be on those. Fortunately Ford was smart enough to keep all 400 transactions in house so that dealers don’t have access or control over pricing.
But this is only one of the few times that a manufacturer has stopped price gouging on a new model.
And this trend is only with enthusiast cars. What do you think would happen if dealers asked 20% over MSRP on the new Grand Caravan?
They wouldn’t sell any.
Why? Because no soccer mom or dad is going to spend an extra $5,000 so they can have the dodge symbol up front if they can go buy a Toyota or Honda at MSRP.
So how can we stop this price gouging?
It’s simple, just say no. Yes, I know you really really really want that new (insert awesome new whatever here), but dealers make money, primarily, by turning over inventory. Despite popular belief, allowing hundreds of thousands of dollars in inventory sit around is something no dealer anywhere wants, no matter how much money they have.
And what’s even simpler is the math on your side. Just because you paid 5, 10, 20, or 50,000 over MSRP, that vehicle will only ever be worth, what it is worth. Now if you are a multi-multi-millionaire and have a collection of zero mile Corvettes and this will join them and sit there forever and a day, great. but to 98% of buyers, they will buy them, drive them, use them, and eventually want the next thing. This means the $60,000 car you just spent $100,000 on will only be worth $35,000 in 2 years when they release the next big thing you just have to have.
Now I am no expert but I personally did not get to owning multiple cars, and being able to buy Ferrari’s in cash by literally throwing money out the window. Even if you have landed that high paying dream job that affords you the ability to squander away $60,000 + in disposable income into your bank account every year, it’s just a bad investment decision. So say no. If we all say no, then you too can buy that next thing without first having to grab your ankles and smile while doing so.