The concern is not that. Yes increase price if demand is high and supply is low.

However, they play those games where they advertise one price but actually have tons of mandated fees when you show up to purchase. So it makes shopping around very hard, you can’t compare between 2 dealerships as even calling them won’t give you that info. It’s predatory and anti consumer.

This is literally the process of purchasing a vehicle in 2022. I needed a car (My old one had broken down after 9 years of service)

Advertised price was 24,500. I walked out totaling 30,000 after all the bullshit and that was with a 4000 downpayment. I left an honest review on Google Reviews about how misleading and unhappy I was with that dealer in particulars process but I loved the car so I just sucked it up.

When we bought my wifes car I had a much better experience. Some dealerships are just sleazy, and if you need the car you need the car.

But you still bought the car!!!

That's the entire point of these crappy business practices. At the end of the day, you paid. Thus they continue doing the same thing.

If you really wanted this to change, don't reward the bad business practices.

(Side note: This is a common topic on reddit /askcarsales. Honest dealers are basically forced to do some of these things. The shady dealers advertise lower prices, but lots of fees. So uninformed consumers show up at good dealer and say "Look ShadyDealer has this exact car for $5,000 less! GoodDealer tries to explain, consumer gets mad, etc. etc.)

> That's the entire point of these crappy business practices

Exactly. They're trying to find the maximum you'll pay. It's like when you click on "Enterprise" plan on a SAAS company - time for a sales rep to Google your company, see the nice share price and give you a "custom" quote.

For what it's worth, there are more reasons.

Enterprise sales can be a long process because of the procurement process at the company. You can be looking at a 9 month to 3 year sales cycle, where a sales person is going to be involved the entire time answering questions, having security assessments completed, responding to quotes from other companies, etc.

You're going to have more conversations about special implementation requirements, integration with an obscure system, special support, training and compliance needs, etc.

For a long time I've believed that every company really needs 2 "enterprise" plans.

1. Standard Enterprise

- Yes we have SAML

- Yes you can have massive discounts on overages

- Yes you can get a copy of our SOC2 Type II if you sign an NDA.

Price: $X / [month,year]

2. Custom Enterprise

- We'll complete your custom security assessment document

- Discuss special options for training and support

Price: Contact Sales

If you need the car, you need the car. I sure did

Usually, I would say buy a used car then... but right now, used cars are ridiculously priced too! The used car dealerships are making money hand over fist too, and some people are out there paying ridiculous prices for old cars, probably because of the wait times on new cars. And you know the dealers are lowballing the fuck out of people who don't know any better, and asking stupid prices.

It also doesn't help that every manufacturer has basically stopped selling their low-end small cars. No more Honda Fit. No more Ford Fiesta or Focus.

The thing is, I don't think that most people buying cars right now even 'need' them. So people like you who do need one are also getting screwed by that.

Let no generosity go unpunished, and let no greed go unrewarded!

When I negotiated to buy my most recent car online back in 2016, the term to use was 'final out the door cost'.

I reached out to maybe 7 or 8 dealers, had a couple that refused to provide a total itemized cost, and then got back 5 quotes that varied quite a bit (like $7500 on a $30k car).

Did one round of negotiation which ended up lowering the lowest price another thousand bucks or so and went with that dealership.

When I bought a car in 2015, I called around asking for the out-the-door price. I told the dealer that offered the best price that I was on the way. When I got to the dealership, I realized I was at the wrong one. I called the dealer to tell him I accidently went to the wrong one, the sales manager was standing there next to me and said we can beat their price, and I told the guy on the phone, they went back and forth a couple of times by $100 each instance. I ended up staying where I was and buying the exact same (common) car there.

When I bought a truck in 2019, there was only one in my state that had the features that I wanted (I did not tell the dealer this). I tracked down the fleet/internet sales manager's email and emailed him asking what the Out-the-door price without incentives was on that VIN, then when it came time to do paperwork, I told them to apply incentive codes XXXXXX and YYYYYY. They tried to add on a dealer package for $1500 (I laughed when they explained it to me: nitrogen-filled tires, VIN etching on the windows, tint on the rear windows, and security lug nuts, I said we're breathing 70% nitrogen right now, and you can buy a VIN etching set online for $10), so I kept saying "no" until they asked if I could do $150 which was their cost, and I said yes to finish the deal.

I told the salesperson that I understand they have to make a profit, and I have no issue with that, that they probably made $1500 to $2000 after the manufacturer volume incentive, and he said they only made $800 off of me.

Things are drastically different now. Bought a 1 year old car for cash last year after an accident totaled my old car. Dealerships have no/low inventory. We had cars sold when we were on the way to the dealership to test drive them. Any negotiation was laughed at.

Absolutely brutal.

You're lucky if the dealership actually has the car. Indeed, you're lucky if it's even been built yet. I was able to get the car I wanted for a not unreasonable price but I did have to wait 6 weeks.

Yep. Wholesale prices for desirable used cars are now often more than the new MSRP and they sell instantly. Especially for things such as the RAM TRX trucks, RAV4 Hybrids and any EV.

the golden rule for having leverage in negotiations is the ability to walk away and not close the deal.

You can apply the pressure by thanking them for their time but their number is too high compared to the competition and I guarantee the car salesman is going to be calling you back with a better deal.

Any sale is better than no sale, they make money selling cars by volume and will take less profit to close a sale, you don’t know their profit margin so let them eat into it to close the sale at a later time by walking away! If you don’t have time, they will play on these fears to make you think you must sign the paper that very second or you are missing that deal of a lifetime.

Also, you can flex carvana prices and be like, I can buy a car through carvana on my phone cheaper than you guys, then simply tell them you are walking away cause of that and see them magically go talk to their manager and get a better price for you right then or later on the phone, I pulled this off a couple times before. You can figure out their profit margin and markup and see if you can get them to lower the price and still make money. Win-win

I just bought a new car as well. It turned out that the "in transit" car had obviously not been built yet. Paperwork charges were a bit high and there were some mostly BS "factory installed options." But MSRP was MSRP and I was actually able to get the charge for the options added to my (already pretty good IMO considering) trade-in price. The main pain was that I had to wait 6 weeks when I had some issues with my current car. But then I went in with the attitude that I was probably paying sticker and would be happy to just get the car I wanted so things went pretty smoothly from that perspective.

Having worked at a car dealership some number of years ago I was surprised and amused by the way that this business has been soaked in (what would only recently come to be referred to as) dark patterns for so long that they have acquired an almost folkloric categorization scheme, with pithy, locally conventional names identifying almost every well-worn dark pattern sales track. The one they'd use internally to sum over your experience above is "sticker is quicker."

I think my favorite out of all of these was "grapes;" the term used by Ford salesmen to refer to fiercely brand loyal pickup truck buyers. juicy and easily squeezed.

This is pretty much 98% American and it's everywhere. I took a lyft cab to O'hare this morning. The quoted ride was $28. The final price was $38. The itemized list was too long to read.

> they advertise one price but actually have tons of mandated fees when you show up to purchase

I had a similar experience booking a hotel room recently. Despite advertising a rate of $x, when I'd click through to complete the booking, towards the end of the process every single one would tack on a mandatory "service fee" of somewhere between $40-80. It seems to me to be a way to keep their room rates artificially lower to stay competitive on the price comparison websites.

(Maybe this has been a thing for a while - I haven't booked a hotel in years)

"Resort fees" are a thing but in my experience you don't see them a lot outside of what are plausibly actual resorts, i.e. typical hotel chains don't usually have them. Of course, there are always lots of taxes that get tacked on. Especially pre-pandemic, I booked lots of hotels. (AirBnB also has cleaning fees etc. although what little I've used AirBnB they seem to be pretty prominently displayed.)

On Airbnb there is one price displayed on the map (the daily rate), then when you click on a place, the fees are added and the price changes. But that still doesn't include tax and local fees which add more to the price when you go to confirm. So what you see on the map is quite less than the final price.

I believe there are laws in some locations that make Airbnb show the price upfront on the map and they do for those places. But it doesn't seem to be the norm in the US.

This is called "drip pricing" and is actively targeted by the EU, UK and Australia.

Fair enough. I've only ended up staying at an AirBnB once so I'm not terribly familiar with their interface.

This was in the Seattle and Portland areas, and they were just regular hotels, not resorts.

Vegas loves these - the last time I stayed on the strip it was $40+/day "resort amenity" fee that they did a great job of hiding throughout the booking and checkin process.

Yeah, Vegas is a particular offender. You can end up paying almost as much in resort fees as you would for a discount casino hotel room itself.

> they advertise one price but actually have tons of mandated fees

Isn't that illegal? They are advertising for non-existent product.

The market is SO inefficient. While you’re right in describing the principles of supply and demand, the reality is that buying a car should be 10x simpler and the price should just be the price. No games, no haggling, no BS add-ons that increase dealer profits. Retail auto is due for a wake up call, and I sense it’s happening right now. You wouldn’t need markups to make extra profit if the cost infrastructure associated with selling cars was lower than it currently is.

Tesla is leading the way today (somewhat painfully in some areas) but they're not the first to try fixing this. GM's Saturn tried to make buying simpler in the 1990s and surely there were other previous examples, too.

Ford seems to be testing the waters about how to simplify the car purchase process: https://fordauthority.com/2022/05/ford-dealers-will-likely-s...

There's plenty of dealerships who have historically had simple purchase processes with standard no haggle pricing but often buyers have to do extensive research in order to find such dealerships.

Ford Corporate is livid with their dealers. Back in 2018 when they put out the Focus RS, dealers basically killed that car with markups. Dealers all marked them up 20-30k which put them around 70-80k OTD. While some bought it at that price, they all just languished on the lot and Ford eventually cancelled due to sluggish sales.

An almost similar thing happened to the F150 Lightning, Ford had to threaten dealers that they would withhold any future deliveries if they caught wind of markups.

From what I'm hearing from friends that work inside Ford, the dealers have burned all their bridges. Ford is sick of their crap and is working to move to direct customer sales (their electric vehicles I believe have already made steps towards this).

Doesn't help that their service centers are just awful.

If Ford had really wanted the Focus RS to succeed they would have just built more cars. Dealer markups only happen on models in short supply. There just aren't many customers willing to pay even $40K for a small Ford hatchback, even though it had good performance specs.

Tesla has increased prices a lot. What’s the difference to the consumer if the increase comes from the manufacturer or a dealership? Tesla also is known for delaying vehicle deliveries if you don’t pay extra for FSD. Tesla just appears to be better than a dealership but they engage in the same shenanigans.

The market is inefficient because dealerships form a cartel, divvy up the geographical areas where they operate and don't allow any competition there. If it was an actual market, carmakers would sell off cars to dealers (e.g. at mega-auctions), who can set up wherever they want (or sell online), and all the games, haggling etc. would disappear.

But then where would the manufacturers put all the financial engineering shenanigans?

And to be clear, consumers shouldn't have to negotiate for hours to try and get a "fair" price during "normal" market conditions.

The current "markup" phenomenon is the same as the prior experience (pre-pandemic) where OEMs intentionally subsidized the purchase of their vehicles well below MSRP, and savvy customers could negotiate thousands off a car deal. It's mind boggling to me that we allow for such an inefficient market to perpetuate! 100 years of franchise dealerships is enough! Time for business and consumers to wake up and enact change.

Even during normal times if you wanted a trim that was somewhat desirable you would get hit with this behavior. Plus you get so many hidden fees that don’t have to be listed like the “Toyota Advertising fee” for over 1k. A few of those different fees Added 3-5k in normal times

Conditions may be different now, with the internet at all, but the fact is this has been tried a number of times by individual dealers, and at least in one very large scale circumstance that I can recall - the now defunct Saturn division of GM. Saturn famously touted fixed, non-negotiable sales prices as a feature of their vehicles, part of the total package of the car similar to its warranty and so on.

Even with all of the might of GM behind it, and with the cars themselves having a distinct position in the market with a few unusual features no other brand had, such as polymer body panels that were lightweight, rust proof and easy to repair (by simply replacing entirely), Saturn only lasted a few years before folding.

I was selling cars myself for a few months during their peak, and recall that they mainly got used as a rhetorical backstop by customers who would bring in an invoice for our vehicle (printed out from edmunds.com, which had just barely become a thing at the time), and argued that they should pay some absurdly small fixed number ($100, $300, possibly $1000 if they were buying an NSX, our "halo" vehicle) over invoice to get a fixed price like saturn.

This was a couple years before dealerships had organically responded to the internet by adding all sorts of hidden costs that do not show up on an invoice to the base price (in addition to the usual ones) so unlike today the invoice was literally our invoice price. But they were not there to buy a Saturn they were there to buy a different brand of car.

This doesn't address the question asked.

Let me be clear; we should move away from Manufacturers SUGGESTED Retail price and go towards Manufacturers Retail Price. Just make it that the price is the price, and then the dealers can become glorified delivery centers/showrooms and service centers.

They'll make tons of gross profit because their cost infrastructure will go down, and OEMs will be happy because they still won't have to deal with customers and can focus on wholesaling cars to their "dealer" network.

The rub is in the finance and insurance products. OEMs all have captive lending arms, and currently dealers make a ton of money ($1,500+ per vehicle retailed) in finance and insurance profit. Navigating that relationship will be interesting as OEMs take on more control of the sales process.

This works fine for unfinanced products, but when financing enters the picture, it becomes a "who is the most willing to take on debt" contest. People who can't think ahead win these, the prices are driven up for everyone else, and nobody has a good time in the long term.

Yep. Even worse: the housing market.

The pattern seems to be: if you create value, you get optimized away. If you buy, screw things up to create scarcity, and flip, you make bank.

Absolutely. Also, higher education.

Health care, housing, and education -- every year you pay more and get less.

It's like Amdahl's Law for capitalism: some things are easy to optimize, other things aren't, and eventually the things that aren't easy to optimize dominate the system.

fantastic point.

Well yeah, if you want as much money for the car as possible, then you'd do it like that. Personally when I sell stuff second-hand (which tends to be cars, computers, instruments and various accessories), I sell it to whoever is first and closest, in that order.

Right. And I don't think we should fault dealers for wanting to make as much money as possible. They're a business after all.

I usually do the same when I sell stuff second-hand because my priority is getting rid of it as fast as possible, not to make the most money. Since dealers have very limited inventories these days, they should take more time to get a better price.

> They're a business after all.

I'd argue that using this phrase to write off wider ethical concerns is one of the key issues here.

Exactly.

Many people actually ”need” things, but always end up getting beaten by the person who has more $. It’s just constant battering of people that aren’t as well off as others. It’s often a disgusting system. The poor always suffer due to this “I’ll just hand wave to the ethics and talk about capitalism“.

Capitalism brought hundreds of millions out of abject poverty in the last thirty years. It has real consequences. The poor in the US have better living standards than half the planet and every opportunity to better except their own cultures holding them back. The left refuses to acknowledge or deal with this, creating generational poverty. What's not to blame is "capitalism".

Capital markets are really great at some things, and really bad at others. Treating them as a one-size-fits-all solution for our problems is inefficient and dogmatic. We end up coupling our moral values with the system we use to try to enforce said values

You're making a few disingenuous claims.

Firstly, that it is illegitimate to criticise capitalism because it has created some benefits. As if we're not even allowed to dream of system reform because we're currently doing better than other countries. Very little social or economic progress would be made if we all thought like this.

Secondly, that those benefits are purely due to unadulterated capitalism. In reality, Western countries follow a mixture of capitalist, statist, and socialist policies. The poor in the US have seen improvements because of the minimum wage, anti-trust regulations, and various social safety nets combined with economic growth.

Thirdly, that the only thing holding other countries back is "their own cultures". This ignores widespread, long-term destabilising interference by Western countries in Africa, the Middle East, South Asia and South America.

How raising pricies is unethical? We are talking about somewhat luxury goods here - new cars.

People who can no longer buy the new car will instead buy a lower priced car, encouraging an upward trend in general car prices.

And then manufacturers will increase supply and prices will go down.

I am fairly open to the argument that price gouging for necessities in times of sudden life threatening crunch is not ok, but car market is operating like a normal market.

> And then manufacturers will increase supply and prices will go down.

Will they? It seems like scarcity pricing is becoming a more and more common strategy.

It's the only way for businesses to not completely collapse and still meet Agenda 2030 goals of reducing emissions worldwide. I personally think that the supply chain crises will be a boon to energy and emissions reduction worldwide. That not everyone will be able to afford a big car and such, well, they'll have to adapt.

This would then leave room open for competitors to move in and price lower to move more units. Ultimately things are set to MR = MC in the long run.

Except that, in this case, chip shortages and a supply-chain crisis mean that supply won't increase.

Then the market is acting rationally and allocating limited goods to the highest bidder. Prices would go down if the population stopped purchasing at the given prices. But all it takes is one person to buy at a price just above yours to keep you out of the market.

I'm not arguing against the dynamics of the current economic system. I'm challenging whether "that's business after all" is a sound ethical defense of a decision to raise new car prices in this climate.

You could just as easily claim that industry consolidation is "rational" because it the people making the deals make a lot of money, but the overall effect is often bad for society.

And this one is not because there are enough cars in the US and even if currently no new are produced - existing are rarely decommissioned because they no longer work.

Very few people need new car now. Or need to change their car now. It is a flexible market. In the current market supply shortage means that you will have to squeeze 50000 more miles out of your current car in the next two years. It's not insulin or baby formula.

A ~30% spike in used car prices which has been ongoing for a year and is predicted to continue for 2-3 years is bad for people that need a car to commute and can't easily afford to buy another if and when theirs breaks down.

Maybe you're right and this is a fraction of a percentage of the population. I'd be surprised but am open to seeing stats on it.

That's just wrong. About 5% of cars are scrapped every year. Many people need to buy a replacement vehicle on short notice because their old car suffers a catastrophic mechanical failure, or is totalled in a collision.

Then all the cars will be bought by scalpers and resold for much more, just as it happened with GPUs.

Sure, Because it’s not your core business

I also think it is precisely within the rights of the dealership. That’s how it is supposed to work.

Similarly, I also love that this website exists as a consumer, to provide balance to the market and better distribute demand (keeping prices overall lower).

Generally, I would agree with you...let the market decide the price. But, car dealers have successfully "cornered the market" with state franchise laws. It is not a competitive market so it won't operate normally.

So much is "wrong" with the dealership model relative to a competitive market I don't even know where to start. But, I do believe over time the franchise laws and dealer cartels will change dramatically. We're seeing that start to happen now with Tesla's model and Ford is creating a new model that looks a lot like Tesla's. Some states, looking at you TX, will continue to protect the local dealers cause the dealer associations donate a lot of money to state politicians but the tide will eventually turn...at least I think it will.

Why is it “supposed” to work that way?

American society is structured such that a car is considered more or less a requirement. Is it okay to charge the max people will possibly pay for other requirements of living like medicine? Martin Shkreli Was universally loathed for that.

Dealers aren’t supposed to charge extreme markups any more Than they are supposed to give cars away for free. They do it because right now they can, but that doesn’t make it moral or American. It is just greed, which is often waived off as “how capitalism is supposed to work”. It’s just greedy usury because they can get away with it.

That’s not what’s happening though. Dealers are artificially limiting supply to induce that sort of logic. They have massive lots of cars parked here in staging areas yet if you check their in stock inventory they quote lead times and wait lists. Surprise though, they have plenty they’re just a bunch of liars taking advantage of the situation.

The other issue is the classic bait and switch they do. They’ll market one price online but once you’re in person suddenly that price is marked up 15k.

The solution? Remove dealers from the equation and let the manufacturers sell directly.

Have you ever purchased a car before?

If you think that the process of buying a car at retail is the market working efficiently, your expectations are incredibly low.

I have, a used one, on Carvana.

I don't think the process of buying a new car is efficient at all. And I'm not defending the dealership system either. I'm just saying they're acting rationally, and that the markups don't shock me.

How about they also publish the best markdowns at the same time?

Just like the market can react to markups, it can also do so for markdowns.

It's called an allocation strategy[0], and what you describe is the "market" one. There's also queues / lines and lotteries, for example. In a line system, there's a first come first served principle, and a lottery consists of people signalling their intent to buy, and then the buyers are selected randomly from that pool.

[0] http://www.econoclass.com/allocation.html

how about you sell it at the listed price to the first who comes in to sign the contract?

Maybe those who were too late will come back and be quicker to decide next time, because they think you are fair.

If you make it all about who has more money, they'll go to another dealer.

There's no shortage of them.

Imagine if any store did that: you go to an Apple store to buy a new iPhone, there are 20 people in front of you. Are you ready to outspend some of them?

Hypothetically, if I were your competitor and you adopted this policy, what would stop me stationing an employee with purchasing power at your door and just being the first one to buy every car as it comes into your lot, taking it home and then marking it up to the actual market rate?

why should I care? Hypothetically that would make me rich in a very short time span and I could afford to buy and resell more expensive cars or buy at volume and make better deals.

You would be basically financing my business, at zero interest rate, while I also make a profit on the money you give me.

You do realize that profit is "the excess of returns over expenditure"? it's not given that you are making more money than me (I could easily have an higher markup), but for sure I'm having less problems than you finding customers!

Thank you for doing it.

I got more cars coming, see you on Monday!

> I got more cars coming, see you on Monday!

This is sort of the problem, though, isn't it? There aren't more cars coming on Monday.

Have you run out of money?

your assumption is that by buying everything I got from me and selling at an higher price than me (doesn't mean higher markup) you are pushing me out of business.

Or that you are monopolizing the market buying all the cars, assuming that you can buy the tens of millions of used cars around.

You're also assuming that I am stupid and I'll let you do that, in the name of principles.

The second time I see you coming in to buy a car I'll check who you are, the third time you come you'll be greeted by a "we are not a B2B company, find another supplier".

The point is dealerships have a limited number of cars to sell, and it's unclear when the next ones will come in. If I want a car and the dealership is out, I'm fine paying a premium or financing the car through them or whatever to get priority. That's how the market moves up.

Aside from the last sentence, I agree, and a fun reminder that raising prices is a good way to mitigate against high demand / low supply.

That said, I was expecting to be countered on the inherent riskiness of my position, as I'd forgotten that it is indeed mutually beneficial but for that.

Plenty of people are, hence the markups on new devices immediately after launch on eBay.

they are not overspending anyone, they are simply trading their time to be first in line, while I buy it from my comfy chair at home at the price listed on the website.

and they also need to hope there are enough stupid people on the internet to buy at a markup something sold in the hundred of millions of pieces,one indistinguishable from the other.

more proof that an honest business can serve society better than scammers.

How do you feel about ticket scalpers who use bots to buy up concert tickets, then relist them for higher prices? This is only possible because the the tickets are being sold originally for under market value.

> How do you feel about ticket scalpers who use bots to buy up concert tickets,

As someone who used to attend more than a 100 concerts/year, I sincerely hate them.

> This is only possible because the the tickets are being sold originally for under market value

No, this is only possible because tickets can be made artificially scarce.

And because there is a portion of the population who owns more money than is able to spend.

> this is only possible because tickets can be made artificially scarce

Surely you agree there's a supply and demand curve for concert tickets, where if the price is sufficiently low, all tickets will be bought, and if the price is sufficiently high, few or no tickets will be bought?

Market value is what people are willing to spend for something. If people are willing to spend more on the tickets (the scalper's price), there's an incentive for the scalper to create bots to scoop up the tickets and resell them. That means the artist performing at the concert is leaving money on the table and letting the scalper profit off their underpricing.

The artist should increase ticket prices and cut out the middle man. Of course there are other systems the artist could use to improve the perceived fairness to fans, like linking ID to tickets, or using a lottery system, or selling tickets to anyone willing to wait in line for days. But all of these have their own pros and cons.

>Of course there are other systems the artist could use to improve the perceived fairness to fans, like linking ID to tickets, or using a lottery system, or selling tickets to anyone willing to wait in line for days. But all of these have their own pros and cons.

Which are all non-money methods of charging more. Whether it's with time or luck.

> How else would you do it?

Sell to first buyer, easy.

Hardly seems fair to people who work long hours to feed their family and don't have the luxury of time to constantly try to scoop up the available vehicles. Plus, the ones who do have the time will recognize the obvious, easy money to be made in re-selling vehicles they purchase.

It’s fine until you have an artificially limited number of essential goods (food and water, housing, etc).

Then it’s bullshit that will lead to violence.