By on August 24, 2015

 

At an upcoming dealer meeting in Las Vegas next month, Toyota will ask its dealers to stop advertising cars below invoice in an attempt to help keep residual values higher and keep dealers from competing in a “race to the bottom,” Automotive News is reporting.

If accepted, Toyota would join Honda in penalizing dealers who advertise cars below invoice. According to the report, after three reported violations in one year, Honda could withhold marketing money from a dealer — which could be $400 per vehicle. It’s unclear how Toyota may penalize its dealers who don’t comply with the proposed new rule.

A less-than-happy dealer said he would consider suing Toyota for price fixing if the ad mandate were enforced.

“This is not in the best interest of the consumer, and I’m not going to keep my mouth shut,” said Earl Stewart, who runs a dealership in Florida.

A Boston-area Toyota dealer said keeping other dealers from advertising below invoice could keep unscrupulous dealers from bait-and-switch tactics to lure buyers to a showroom with one price, and sell them on another.

“It would be wonderful if this move could put some sanity into pricing,” said Mike Hills, general manager of Bristol Toyota-Scion.

Stewart said that he sells three out of four cars below invoice and that his dealership is a no-haggle dealership, something Lexus will reportedly adopt soon. He said that if he can’t advertise below invoice, he would lose business.

(It’s worth mentioning that dealer holdback allows some dealers to sell below invoice, but still make a profit on the car.)

At its Scion stores, Toyota is reportedly streamlining its online shopping process to encourage buyers to shop and pay for a car online before having it delivered*.

*Only in states where that sort of thing is legal, of course.

No word on whether balloons on cars would still be allowed.

Get the latest TTAC e-Newsletter!

20 Comments on “Toyota Asking Dealers To Stop Advertising Below Invoice, World Not Over Yet...”


  • avatar
    sirwired

    Well, the Supreme Court has said that contract provisions prohibiting retailers from competing on price are perfectly legal, so any support for the dealers is going to have to come from state law or their own contracts with the manufacturer.

    • 0 avatar
      wmba

      Would be illegal for a manufacturer to tell a retailer what price to sell in Canada.

      “With respect to MSRP and minimum resale pricing practices, subsection 76(5) of the Act stipulates that a supplier’s suggestion to a retailer of a resale price or a minimum resale price for the product supplied is proof that the retailer has been “influenced” in its pricing. The presumption does not apply, however, where the supplier establishes that, in suggesting a price, it made clear to the retailer that the person is under no obligation to accept the suggestion and will in no way suffer in its business relations with the supplier or with any other person if it fails to accept the suggestion.”

      http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03687.html

      Surprised that your Supreme Court has found that collusion is legal.

  • avatar
    APaGttH

    Given the ATP of the Camry, and it’s total fleet volume (total units, not percentage) they are already toward the bottom of the pool from a price stand point.

    You don’t have to have a degree in finance to figure out:

    Lowest ATP + steep dealer discounting + subsidized leases + 60K volume to fleet year after year = declining residual value

    I remain utterly impressed by Honda and how well they defend their Accord business have tenacious stuck to a path of largely not driving volume on incentives. Yes, they have some killer lease deals, but Toyota’s cash on the hood for the Camry has been Ford grade at times in the last couple of years. Honda hasn’t touched it – and although Honda probably fudges their numbers to fleet via fleetail – they don’t move vehicles in any sort of volume.

  • avatar
    canddmeyer

    What a crock. This announcement is just free advertising for Toyota. There isn’t as dealer on the west coast advertising, or selling, below invoice.

    • 0 avatar
      highdesertcat

      On the West Coast, yes, that’s true! But in New Mexico the dealership in Las Cruces was selling a ton of the 2015 Camry LE for $19K+, and well below $20K.

      The dealership in Santa Fe routinely sells the LE for ~ $20,500.

      I know several individuals in MY area who have bought a brand new 2015 Camry LE for a family member, or as a spare vehicle for a student.

      Toyota still has a wide-range of upgraded Camry like the SE, XSE, XLE and their V6 models that can easily slosh the TP over $30K.

      But no matter what the price, the Camry continues to be the best value for the money in the mid-size sedan class.

    • 0 avatar
      APaGttH

      Huh.

      http://www.magictoyota.com/search/new,special/tp/s:md1,v:1/

      2015 Toyota Camry LE stock number 50706.

      $23,860 is a stripper with destination – so this has one small option to get $23,995

      Invoice with destination is $21,907

      Selling price before rebate – $21,900

      Splitting hairs – sure $7 below invoice — took me all of 10 seconds to find.

    • 0 avatar
      Richard Chen

      East coast: $19,298 + $299 processing. Fitzmall has already stopped posting prices of Cadillac, Mazda, and Subaru vehicles.

      http://www.fitzmall.com/Inventory/Detail/00003817299/NEW-2015-Toyota-CAMRY

  • avatar
    eggsalad

    I’m not very smart when it comes to auto dealer franchise agreements, but it feels like manufacturers want to have their cake and eat it too.

    Car makers want to control dealer advertising, look and feel of the showroom, etc., etc. There’s a lot a dealer is forced to do to comply with the franchise model.

    But if you go to a manufacturer and complain about an unscrupulous dealer, they always respond along the lines of, “Dealerships are independently-owned businesses and there’s nothing we can do about your problem.”

    I think this is why everyone is fighting the Tesla business model. Under the current model, manufacturers and dealers can pass the buck for responsibility all day long.

    • 0 avatar
      rudiger

      Exactly. When a new, popular model is released and dealer price-gouging runs rampant, it’s always, “Hey, they buy the cars from us and can sell them for whatever they can get. Nothing we can do about it” from the manufacturers.

      Yet, when some dealers routinely sell under invoice, suddenly the manufacturers start feeling butt-hurt and want to withhold money from them. Truly, the auto business is about as cutthroat as is possible.

    • 0 avatar
      jpolicke

      +1 You were reading my mind!

  • avatar
    SCE to AUX

    “Invoice” – whatever THAT means.

  • avatar
    Prado

    Invoice has become just as meaningless as MSRP in today’s car buying game. The spread between the 2 has been significantly reduced, while that money has been moved to dealer incentives. Advertising invoice would be completely underwhelming to the educated consumer.

  • avatar
    runs_on_h8raide

    And people don’t want dealers? If all cars were directly sold to consumers you’d have to pay higher prices….guaranteed!

    • 0 avatar
      SCE to AUX

      You’d pay more only if there was no competition between brands, which there is.

      Direct sales would reduce price differences within the same brand, so you couldn’t play one Chevy outlet against another Chevy outlet. Differences could still exist, due to regional issues such as transportation costs, for example.

      But the consumer always has the choice to walk out and buy a different brand.

  • avatar
    qest

    “Stewart said that he sells three out of four cars below invoice and that his dealership is a no-haggle dealership…”

    A “no-haggle dealership” that sells 75% of their cars cheaper than the “no haggle price” to people who haggle?

    The Truth About Cars buries the lede.

    • 0 avatar
      Scoutdude

      That is not at all what was implied. The implication is that his no haggle price is below invoice on 75% of the vehicles.

      The no haggle dealerships around here price the majority of their cars under MSRP, can’t say if it is below invoice because I haven’t researched the actual invoice pricing on them. But it is normal to see them advertise that their no haggle price is $xxxx under MSRP for the bulk of their cars. Of course the hot models are often discounted minimally off of MSRP if at all and the discount on a high end model is larger than that of a base model of the same vehicle.

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • ToolGuy: @mcs, Do you think he got the promotion because he drove the “right” vehicle? If...
  • mcs: Well, with the money he’s saved by driving the jeep, maybe in the holiday spirit, he could spring for some...
  • BobinPgh: Did the fact that according to Chrysler, it was “Suddenly 1960!” have anything to do with the...
  • ToolGuy: Re: XJ Cherokee This individual (current CEO of Amazon) has a net worth of something like $400 million and...
  • olddavid: I agree. I live where most electricity is generated by hydro and/or nuclear at Hanford. In my travels I see...

New Car Research

Get a Free Dealer Quote

Who We Are

  • Adam Tonge
  • Bozi Tatarevic
  • Corey Lewis
  • Mark Baruth
  • Ronnie Schreiber