By on July 23, 2017

dodge demon

Even though we knew the limited supply of Dodge’s SRT Demon would drive up prices astronomically, Fiat Chrysler still made a valiant effort to reduce markups by prioritizing deliveries to dealerships offering the vehicle at (or below) MSRP. Unfortunately, the plan didn’t work as intended.

This was especially true after some dealerships found a workaround by having intermediaries on eBay auction off the right to buy one of their Demon allocations. Instead of selling the car above the $86,090 sticker, which forces Dodge to omit custom nameplates and other Demon perks, they’re allowing prospective buyers to bid on the “privilege” of purchasing a Demon at the manufacturer’s stipulated value — for thousand of dollars.

According to Automotive News, buyers are shelling out $10,000 to $70,000 to acquire SRT Demons at a “fair price.”

Last week, dealers in South Carolina, Louisiana, and Tennessee auctioned the right to purchase coveted Dodge with reserves set between $10,000 and $22,500. However, earlier auctions showed some customers hitting final bids as high as $75,000.

Ebay sellers have been clear that they are only tangentially related to the dealerships, specifying they have an “outside relationship,” as if they are indicating some kind of complicated romantic status via social media. One lister explained that “there will be somebody directly from the dealership contacting the winning bidder prior to any money being exchanged so that the deal is understood from both sides.”

If that sounds sketchy, it is.

Meanwhile, the majority of dealerships should be satisfied taking the honorable route of gouging customers upfront. Though a few have also decided to list regular Challengers at unheard of prices, in the hopes to subtly pass them off as Demons. We even spotted a couple of V6 cars carrying $80,000 totals online. Those examples appear to be anomalies, however.

2018 Dodge Challenger SRT Demon

In June, Dodge brand chief Tim Kuniskis explained the automakers allocation strategy while urging dealerships to play fair. “We know some dealers may be tempted to sell to the highest bidder,” Kuniskis said. “But we are encouraging them to leverage the Demon as a halo for both the brand and their dealership, to bring customers into their showrooms and see everything we have to offer.”

However, when you can sell something for thousands of dollars more than MSRP it’s difficult to resist the urge to do so. Finding a loophole that also permits you to adhere to the manufacturer’s stipulations is just icing on the money cake.

A few dealerships are attempting to reach a moral compromise, though. Bill Marsh Chrysler-Dodge-Jeep-Ram in Traverse City, Michigan told Auto News its sole Demon will be sold for one dollar below sticker price, with the right to buy it being auctioned off among existing customers for the “benefit of four local charities.”

According to Marsh’s marketing director, Mike Kent, the auction alleviated a problem for the dealership, “which [is] ‘How do you maintain the integrity of one-price when the value of the car goes beyond its MSRP?’ This gets us beyond that.”

FCA said it is monitoring dealer actions in selling Demons, but confessed there was little the automaker could do beyond encouraging dealers to sell their Demons at the manufacturer’s suggested retail price.

 

[Images: FCA]

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39 Comments on “Dodge’s Markup Deterrent Dexterously Defeated by Dealers...”


  • avatar
    pale ghost

    Another reason to allow direct manufacturer to consumer sales.

    • 0 avatar
      hreardon

      I don’t disagree with allowing manufacturers to sell direct, but if you are under the impression that this will lead to lower prices you are sorely mistaken.

      Part of the reason for the shenanigans is because of limited supply. The reality is that dealers markups (without the shenanigans stated here) allow the market to find a clearing price. You, as a buyer of said limited edition product, may not like it, but if the demand is high, then people will pay the markup. If demand is not, then the price will fall until a clearing price is determined.

      When the New Beetle was introduced in late 1998, demand was so high, specifically for silver models, that we were selling them for $20k over MSRP to start and by the end of 2000 we were still getting between MSRP and around $5000 over MSRP – and our allocation of silver beetles was better than almost anyone else in the Midwest.

      People weren’t thrilled, but the ones who wanted that specific make+model+color combination gladly paid it to get what they wanted.

      • 0 avatar
        Garrett

        Eliminating dealerships will reduce costs, and possibly prices, because the middleman isn’t there to get his cut. Alcohol would be cheaper in most places if we didn’t have the requirement to have distributors and retailers.

        Your example with the Beetles is why people hate dealers.

        • 0 avatar
          hreardon

          Garrett –

          That’s simply not how it works with very large capital goods – it’s not like buying an iPhone (more on that later). We’ve discussed this in other threads, so I won’t go into it here, but mass production, logistics and cashflowing of $599 iPhones is very different from hundreds of billions of dollars worth of automobiles.

          Everyone who claims a direct sales model is better is really clamoring for *convenience*, because that’s what you’ll get. You won’t get lower prices, you’ll get a more convenient transaction. Carmax is convenient, but rarely is it the “best deal” (a relative term to every individual). Apple’s retail stores essentially eliminated the entire Apple dealership network and with it, virtually any competition. How often do Apple products sell for below MSRP, barring a bundle deal at someplace like Macmall.com?

          As to the Beetle example – here’s the catch: 500 people want one, but there are only 20 allocated. We could sell at 20 at MSRP, or we could jack the price up and let people compete for it. As the price goes up, the 500 number goes down, until you reach a point where people aren’t interested. How is this any worse than a house selling for over asking price in a hot market? Were ChryCo able to sell direct, you know darn well they’d research to find out the real value of the car and price it accordingly to start. So they sticker it at $80,000 instead of $60,000 and then start lobbing incentives onto it once the initial demand peters out.

          I’m not arguing that the dealership network is good the mechanism being described in this article is idiotic- I’m simply that the argument that prices will necessarily decline is misguided. But even in this case, we armchair quarterbacks think it’s insane, yet no doubt there are people paying these figures to get what they want, when they want it.

          What should change immediately is the revocation of states’ laws banning direct OEM sales. That will introduce some additional competition into the market and then we can see if the mass market is willing to trade the convenience of the OEM retail experience for higher prices.

          • 0 avatar
            Robbie

            Middlemen cost money. If removed, these cost will be divided over customer and producer. To presume that 100% will go to the producer (as you seem to do) seems odd at least. Eve in that extreme and unlikely case, money is flowing to an entity that actually adds value (the producer), rather than a middlemen who effectively levies a tax on a good.

      • 0 avatar
        28-Cars-Later

        Sounds like mental illness in action. ‘Murica.

      • 0 avatar
        healthy skeptic

        @hreardon

        >> Part of the reason for the shenanigans is because of limited supply.

        A good example is how Tesla mercilessly gouges customers with the Model 3, a car with a near 400,00 pre-order waitlist that’s just about to start production. First-in-line customers are paying…

        …oh wait, they’re paying the same as the guy at number 400,000. Which, by all accounts, seems to be shaping up as a pretty fair price for a car in its class, thanks to competition from other manufacturers.

        Anyway, I agree with you that those dealership protectionist laws need to be kicked to the curb. Direct sales may or may not be a dramatic improvement in the way we buy cars but that’s for consumers and the free market to figure out.

    • 0 avatar
      Lorenzo

      That would take a federal law that pre-empts the mass of state laws to protect dealers, who spend a fortune on local and state political campaigns.

      You’ll still have to pick up your car from a dealer, and who knows how much prep he’ll do when he has no incentive? You’ll also still have to go to a dealer for “free” maintenance and warranty work.

      Car dealerships attract a large number of sleazeballs because of the money involved. State agencies, federal agencies, and the manufacturers need to work in concert to keep them in check.

      It’s like mousetraps. Build a better sleazeball trap, and the lure of riches will just create sleazier sleazeballs.

    • 0 avatar
      sportyaccordy

      Only if manufacturers are allowed to sell them through physical dealerships. That would continue to make sense as they would need the same real estate for service centers anyway. But it’s a huge risk to the manufacturer- which is why they utilize the current model.

      Besides, for every Demon or GT350R sold over MSRP there are literally thousands of cars people actually need sold well under. Much of that comes from the flexibility of dealers willing to play ball that would disappear with a manufacturer direct approach. Not to mention the impact on sales- would you buy a car sight unseen? This is not a 50″ tripod on Amazon; the physical interaction with the car at the point of transaction is a huge driver of said transaction, even for someone buying a Camry LE.

      • 0 avatar
        I_like_stuff

        You could still have test drive centers. Instead of going to Bill Ripoff Toyota to test drive, I could just go to a corporate owned Toyota test drive center. At that test driver center there would be 5 Camrys to test drive, 5 Corollas, 5 Tundras, etc. I touch and feel and drive what I’m interested in. And then if I want to buy, I either buy it there on the spot for the listed price – like I do with virtually every other product I buy – or go home and order it online from Toyota.com.

        Why I need a sleazy salesman and an even sleazier F&I guy as part of the process is beyond me.

        • 0 avatar
          joeaverage

          The CarMax/Carvanna business model will work the majority of people. If only they were an outlet for the new cars too.

          Most regular people just want a car that isn’t broken, is shiny, and has lots of interesting features they’ll seldom if ever use.

          3 years later: “Oh look! Its has GPS…”

          Do they ever use it? Nope.

        • 0 avatar
          snakebit

          Between the dealer markup on recently popular models of cars, and sleazy practice of charging a ‘documentation fee’on top of agreeing to pay the posted price on the window of new and used cars when that ‘documentation fee’ was not posted separately on the cars’ sticker, dealers bad reputations have been earned in spades. I just talked to an owner on Sunday who bought a Challenger Hellcat in upstate New York even though he lives in New England. Seems no local dealer would sell him a car at MSRP, instead adding many thousands of dollars to what Dodge suggested this car should sell for indicated on the window sticker. And I remember while in college dealers and third-party thieves in the Los Angeles area adding $1500 to the $3596 MSRP of the new Datsun 240-Z in the early 1970s. Again, my friends had to shop in neighboring Arizona and out-of-state elsewhere to get on the waiting list for a 240-Z at MSRP. And, then there’s the price-gouging tactic of adding a ‘documentation fee\'(it ranges from $200-$400)without disclosing it on the car sticker, even when the buyer is willing to pay the asking price posted on the car window. This practice by the largest mega dealer in New England has irked me so much that I actively caution my friends who ask me where to shop for a car to stay away from any of their dealerships. And no, it’s often not the saleperson who’s the culprit here, but the domineering sales manager who LIES that if he were to skip the charge to me, he’d have to refund all his previous buyers, too. While I was in the car business, the rule of thumb was that if a buyer was happy with their deal, they told one person-but if they were unhappy with their deal, they told nine others! It’s disappointing that many dealers forget that axiom today.

    • 0 avatar
      slavuta

      I am OK with having dealers but [in my view] price should be established by manufacturer and dealer can’t change it. So, for example, I see adverting on TV – “till 08/15 buy Honda Accord EX for $22,000…” This is it. I should be able to go to any dealer and no need to deal with prices, etc.

      • 0 avatar
        turbo_awd

        Add $5K to MSRP, and your model will work for 97% of situations. Problem is – most people wouldn’t be happy with that model…

        • 0 avatar
          Mandalorian

          That model will exacerbate the rebate bait-and-switch schemes already in place now. $22,000: that includes the employee discount, military discount, Nevada resident discount, boxer brief wearer discount, gum chewer loyalty discount, reading glasses wearer discount, etc. Your actual price is $34,000.

        • 0 avatar
          hreardon

          Right – it’s been tried and in most cases, fails. Ask any dealership group who tries to do the “one price shopping” game.

          Additionally, everyone forgets that there is no need to negotiate: pay the sticker price for 97% of cars out there. For the special models, expect that there will be competition for them and you’ll have to pay to play. Just like buying a house in a hot market.

    • 0 avatar
      namesakeone

      I get the impression that, were there direct manufacturer-to-customer sales, the manufacturer would gouge the customers instead of the dealers.

      • 0 avatar
        hreardon

        There’s no such thing as a free lunch – someone has to pay for the costs associated with the inventory, trade-in, support structure, etc. You’re paying an OEM or you’re paying an independent dealership group.

    • 0 avatar
      hreardon

      @Robbie –

      Middlemen cost money, but they also serve a vital purpose in the logistics and finance chain: they allow the OEMs to keep producing while providing vital cashflow since the vehicles are invoiced as soon as they are loaded onto transport. As such, the factories don’t hold inventory and the carrying costs of that inventory (read: interest and tied up capital) are passed along to a third party.

      In the direct model that many clamor for, the OEMs will assume the financial overhead for inventory along with the overhead for all of the retail / service outlets. Don’t forget the inventory of used cars that will have to be taken in on trade. None of this is free and all of this adds to the cost of the new vehicle in some form.

      Again, no argument that we should not allow OEMs to sell direct if they so desire, but again: you’re trading convenience for price. Amazon does not necessarily offer better prices than the competition, but they offer an outstanding shopping experience that people are paying for. Convenience, not necessarily price.

  • avatar
    hamish42

    Another example of car dealers populating the bottom of the sleaze barrel. I will purchase my next new car when I can go on line and order it without dealing with these people, many of whom could not define the word ethical if given a dictionary. Luckily, that day is rapidly approaching.

  • avatar
    mcs

    Sometimes you can find a small rural dealership more than happy to sell a hard-to-get car at MSRP.

    • 0 avatar
      rpol35

      That’s a good thought but hard to get models are frequently not available to those, small, rural dealerships. Hard to gets have a tendency to be alloted to the bigger, high volume dealers.

      • 0 avatar
        mcs

        It’s ordered, not on the lot, so it shouldn’t be a problem. A car salesman friend of mine used to do that. I’d stop in to see him and saw the out-of-state orders right on his desk. I did it a couple of times myself. They weren’t rare vehicles (correction, one was), but the dealers out in the boonies were more willing to deal.

  • avatar
    slavuta

    for half its price you can buy an airplane and have more fun

    • 0 avatar
      A4kev

      Yeah I feel deep sadness for the moron who goes to the dealer to find out why he can’t smoke his tires and is told that his Pentastar isn’t likely to do that.
      Biggest rip off / use of the supply/demand system was when the first Mazda Miata hit the dealers.They made margins that even a true capitalist would be ashamed of ! Hah!
      And that was a “high volume” vehicle compared to the Demon,ah I so want to drive one ! Probably get close to my first ride on a Kawasaki Mach1. Aren’t we talking about a <9 sec.1/4 ? That's brutal stuff ! Yeah where do I sign !

  • avatar
    LS1Fan

    The dealership sales model is as obsolete and painful as the Spanish Inquisition,and should be abolished with the same fervor.

    Take this case; if dealers didn’t exist buyers could order the Demon at $89,995 and re-sell them directly to others at a markup IF they wanted . Instead the consumer surplus is hoarded by greedy dealer groups with the moral authority of a Taliban hit squad.

    • 0 avatar
      Maymar

      Wait, is your argument that dealers shouldn’t be allowed to make outrageous money on limited-production vehicles, because it inhibits the ability of private customers to do so instead? I think dealers are awful, and wouldn’t mind seeing any attempt to improve the model, but what utility do private speculators provide that dealers don’t, to justify the profit being more than rent-seeking?

  • avatar
    Fred

    The sad part for us po folk, is that those who over pay are probably just going to store these cars and resell later. So I don’t even get to see them at the strip.

  • avatar
    Jeff S

    If FCA goes belly up or is acquired by another manufacturer and Dodge is killed off then maybe these Demons will be worth something. It might take a while to get your money out of these if ever. I am not that crazy about dealerships but I don’t see them going away anytime soon. I put the dealership experience akin to going to the dentist and having a root canal. I would rather test drive and then order what I want. Maybe in the future I will rent what I am interested in and if I like it go thru Costco’s auto buying program. If I never saw another car salesman again it would be fine.

    • 0 avatar
      mcs

      Who knows what the collector car market will be in the future. They could even come up with more powerful models leaving the Demon as second or third most desirable. In fact, I’d be willing to bet that will happen.

  • avatar

    Sorry, I hate stealerships. I will forever assume the car buying process is an adversarial one staffed by liars and cheats. They are predatory by nature and design. When the tables are turned and supply is in my favor I buy, never when in theirs. Never guarantees a good deal but I like to watch them pander and crawl.

    • 0 avatar
      Erikstrawn

      I second this. I don’t believe manufacturers directly running dealerships will magically clean things up, but at least we will be the manufacturers’ customers, not dealerships. I think you would see a change in what cars get bought. Warranties will get enforced, whether or not the car owner has brought their car in for every single service. Finally, if the manufacturer doesn’t skimp on accountants there will be more transparency within the organization which will drive efficiency up and leave more room for competition on price.

  • avatar
    LarryFL

    Noticing a lot of anger here over MSRP, a common thing on Challenger forums. Almost all vehicles are sold below MSRP, and few are sold above. Its not ‘gouging’, when there are other cars being sold below MSRP; you don’t ‘need’ a Demon, its a ‘want’ thing.

    No one complains when dealers are forced to liquidate vehicles at 65% of MSRP. Its an arbitrary number set in marketing departments years before the the first vehicle is produced. Don’t get hung up over it. My local Dodge dealer has five Hellcats on his lot baking in the sun for months. Remember when those were being ‘marked up’, and the MSRP hysteria?

    Not trying to preach, just trying to help some get over the misguided anger they throw towards their local dealers. A dealer makes $20K profit on 1 Demon, or $20K profit on 15 RAM trucks. What’s the diff, really?

  • avatar
    87 Morgan

    Why do people get so hot and bothered about this? How many here on this site are **actually** lining up to pay 80k or whatever the MSRP is for a Demon, and now that they have to pay an addendum through an intermediary have decided you are out?

    This car has no purpose other than to be a garage queen, toy, collector car, investment for the boomers out there and if they are willing to pay nutty dollars to get their hands one one, have at it.

    I think the hysteria for the Demon stems back to the 1970 Superbird that became lot poison and then the darling of the auctions with eye popping sale prices.

  • avatar
    SCE to AUX

    In a market with choices, I don’t care how much is charged (or paid) for this car.

    Besides, the Demon is a one-trick pony likely to be upstaged by another FCA offering (“Banshee”, maybe?). What are the Hellcats worth today, that people paid over MSRP for a few years ago?

    Just imagine a world where Dodge produced a Demon, and nobody cared. Now *that* would concern me.

    By the way, Matt – excellent headline for this story!

  • avatar
    dwford

    I just paid $32 PER TICKET in BS fees to buy Guns N Roses tickets. Charging what the buyer will bear happens in every industry.

  • avatar
    CarNutChris

    Since 100% of all new cars are sold at MSRP, selling one for over MSRP is totally out of line…oh, wait….never mind.

  • avatar
    bikegoesbaa

    “How do you maintain the integrity of one-price when the value of the car goes beyond its MSRP?”

    Perhaps launch with a higher MSRP?

    Would it be possible to not specify one at all? Just put the cars on the showroom floor and let the market determine their value without even trying to establish a sticker price?

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