Editorial: MSRP RIP
Everybody who knows me knows I’m a tightfisted son of a bitch. I may own Benzes for their profits, but gas sippers are my daily drivers. My wife’s daily driver has been an old Volvo wagon (which she loves). And like many of you, I’m nearly OCD when it comes to buying quality on the cheap. When Robert asked me to find him a $5000 car, I found a $4000 car. Why? Because $4000 is the new $5000. For those of you contemplating a new ride and have the cash, now’s a good time to buy. The Manufacturers’ Suggested Retail Price (MSRP) is dead.
Reality check. At the moment, there are only two types of car companies: the living and the dying. Brands such as Toyota, Honda, VW, Porsche, Mercedes, BMW, Audi, MINI and Nissan still have healthy balance sheets and great products. As long as they stay true to their core talents, today’s recession will lead to long-term global progression. But even though these brands offer quality vehicles, the money to support the demand has disappeared. That’s bad for some customers. Good for everyone else.
Most credit-driven customers have been cut off. Many of the banks that were ‘helped’ by the recent bailout are also among the largest auto finance lenders in the U.S.: Capital One, Citibank and Bank of America. The bank’s balance sheets are looking better– in the same that clothes can hide leprosy. Unfortunately for the ‘fleeced’ taxpayer, and the political ‘yes’ men, the banks are hoarding their new found, taxpayer-funded wealth.
This net drop in the amount of money truly available has resulted in a cliff-face 20 to 40 percent drop in new car sales for even the “good” brands. Although these manufacturers aren’t selling vehicles at Buick levels, the previous customer dealer paradigm has rolled-over and died. To say it’s a buyer’s market would be like saying a jailhouse crack dealer has sway over an incarcerated junkie.
The consumer strategy required to make the best of a bad situation (for the dealer) is simple enough. When you visit that big fishbowl called the dealership just say no to whatever’s on offer and wait. Or leave. There’s no ‘take it or leave it’ or ‘you really need to buy today’ when the inventory is stacked to the roof and the customers are none deep. If you want to squeeze the best deal, all you have to do is say ‘No!’ for a week and enjoy what amounts to a Chinese auction.
Sticker? What sticker? Brand new 2008 Mercedes GLs are going– or not– for $14k off sticker. The same vehicle can be had for a three-year lease for $5k down, $800 a month. Did I say $800? How about $700? $600? I’ve never seen anything like it. Pay no attention to Edmunds or anyone else. Published deals have nothing to do with anything anymore. Desperate doesn’t even begin to cover it.
The same reality applies to the used car markets. Last night I saw a 2003 Mercedes SL500 go for a mere $20 grand, a 2006 Scion Xb sell for $9200, and a loaded 2008 Hyundai Santa Fe Limited with less than a thousand miles no sale at $17k. All of these cars were in strong demand when they were first released. Now they’re just casualties of a credit-driven economy and a repo-saturated car market. In a recession, used car vehicles pick up some of the slack. But not today. Even the market leaders of not too long ago are in a depreciation death spiral.
Then we have the ‘patients.’ GM, Ford and Chrysler are fighting for their survival. Many of their models will not be replaced (through Ch11 or otherwise), and virtually all have record levels of supply. From a 200+ day supply of Corvettes to fields of near-new rental crapmobiles (e.g. Pontiac Grand Prix and Chrysler Sebring), there’s nothing but metal to be moved. Buickman is sending brand new Chevy Silverados our the door at $10k. Again, just say no and reap the rewards. Stupid deals are smart. Don’t be what William Shatner calls timid negotiatiors these days: “mamby-pamby.”
The situation is even more ridiculous at small dead brands such as HUMMER, Saab and Volvo. Their dealers face the morbid task of selling cars that with virtually no marketing dollars behind them. A 2008 Volvo S80 may theoretically compete with the Lexus LS and Mercedes E-Class, but no one knows or cares. A non-competitive product with no market presence will eventually go out the door for a price that is closer to the lower car class.
RF and I are still debating the ‘when’ of car buying during this current carmaggedon. I believe now’s a great time to buy. Robert points at the sheer volume of unsold inventory at the new and used car level, and the lack of consumer confidence (tied to the housing market). Whatever the scenario, however long it lasts, however MORE desperate things become (fancy buying a C11 Malibu for under $5k?), MSRP for all but the most exclusive vehicles is RIP. Go get ’em tiger!
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dwford: There is a saying in my country that "the stupid are the happiest people". And why not they don't know any better. I think that explains your happy customers.
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