By on February 1, 2022

It has been a seller’s market over the last few months (more than that, if we’re honest) in the car industry, with demand far outstripping supply for most vehicles. Images of dealer lots bereft of vehicles to sell have become familiar. This has led to some stores slapping so-called market adjustments on hot-selling inventory, sure in the knowledge that someone will pay the inflated asking price.

Manufacturers are noticing. Ford chirped about the practice earlier this year, and now GM has seen fit to send its dealers a sternly worded letter as well.

According to the Detroit Free Press, General Motors sent correspondence to its dealer body a couple of weeks ago, warning they would be cracking down on dealers behaving badly. In a leaked copy of the memo linked by the Freep, the President of GM North America, Steve Carlisle, said “This letter serves as notice that GM reserves the right to redirect your vehicle allocation or take other recourse prescribed by the Dealer Sales and Service Agreement.” Them’s fighting words in Dealer Land.

Earlier in the memo, Carlisle reminds dealers they are obligated to “ethically and lawfully” sell GM products. A key point apparently sticking in the corporate craw is a practice that may include providing customers with misinformation about additional sums being necessary for a customer to keep a reservation. Anecdotes of these shenanigans can be widely found online in forums and customer review sites. He also brings up the issue of padding MSRPs, saying it has come to their attention that some dealerships have “requested customers to pay sums far in excess of MSRP” in order to purchase or lease a vehicle.

Dealer markups are a difficult situation for this author to examine with any detachment, given his former ties to the front house of a dealership. On one hand, MSRP is just that: Suggested. It’s right there in the name, fer chrissakes. If a customer is waiting with an extra $5,000 in hand, some will argue to let the free market reign. The flip side of that is the braggadocio I hear from certain players in the game talking about “12k front end deals” on pickup trucks or SUVs and how it’s “not their fault” if a customer chooses to overspend on a new vehicle.

That latter comment deserves a post all its own and is best left examined on another day. Additional dealer markups might not be strictly against the franchise agreement, but GM might decree excessive ADMs to be unethical. One thing’s for sure: the party will end at some point – probably with a whole lot of negative equity. Until then, it seems the suits in Detroit are watching very closely.

[Image: GM]

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94 Comments on “Reading the Riot Act: GM Pens Memo to Dealers About Markups...”


  • avatar
    CKNSLS Sierra SLT

    The issue being is that negative equity will not be of benefit to the next vehicle purchase. It’s going to be difficult for that dealer to roll $10,000.00 in to a new loan come vehicle replacement time-and still keep a loan payment where a buyer wants it. Yea-some will say we will still see yet longer loans. Maybe, but a ten year auto loan doesn’t seem sustainable.

    In other words-Dealers are satisfying greed today at the expense of a new sale a few years down the road.

    • 0 avatar
      SCE to AUX

      Same with houses. If/when housing prices settle back to normal, imagine being 25% upside-down on a $400k+ mortgage when you want to move in 5 years.

      https://fred.stlouisfed.org/series/ASPUS

      • 0 avatar

        I do not have to imagine that, it happened in 2008-2012. Many my friends were upside down and could do nothing about it.

        • 0 avatar
          Art Vandelay

          Houses tend to bounce back however and at the end of the day, very rarely do you have a situation where you have to buy a new house, unlike cars which can need replacement for a myriad of reasons.

          I’ve been upside down on a home. I just lived in it until I wasn’t. Cars don’t bounce back like that typically during the life of a loan.

          Besides, there is no guarantee we are in a housing bubble. Many municipalities have high home prices as a result of anti construction policies for multiple reasons.

          • 0 avatar
            noorct

            Yes and no Art. Eventually yes you’re right, but it took 6 years to recover to the 2007 peak… on average (and many never recovered). Not super helpful if people need to move for a job in the intervening 6 years particularly if it’s no an area you could rent it.

            Your point is well taken though that a house is a relatively permanent investment and can last / appreciate over centuries if taken care of. Cars don’t have that horizon.

            Moreover some of these adjustments are just absurd. Pickup trucks now are the worst – 2 years ago you could get a truck for 20-25% off MSRP all day long. Now they want 15% over MSRP. When the market recovers to normal on a $50K truck
            1) You paid nearly $60K
            2) Ordinary times it would be worth $40K
            3) Add in normal depreciation and that thing is underwater from day 1 to basically day end of loan.

            It’s odd but as bad as lease rates are right now I would lean that way. At least you get the privilege of overpaying by 20% each month but at the end of the three years when the residual is $40K but the market value is $20K you’re not stuck with that coming out of your pocket.

          • 0 avatar
            FreedMike

            @noorct:

            In theory, leasing is a good way to go now, but keep in mind that on a lease, the only thing the dealer has to disclose is the monthly payment and residual. They can sell you the car (the capitalized cost) for whatever they want because that figure is not required to be disclosed. They can also mark the interest rate up. In this environment, that’s a license to steal.

            It’s important for people who are leasing to understand all the components of the payment. I leased a car back in June, and there were two dealers I worked with who were trying to basically sell me the car for five grand over sticker (when they were advertising them on cash-price buys with a discount), or charge a 20% money factor, or both. They refused to let me see the figures that went into the payment. I told them both where to stick it.

            The dealer I went with gave me actual figures that I could plug into a lease calculator and make mathematical sense of.

            Leasing is a great option if you’re financially literate.

          • 0 avatar
            skotastic

            Yeah you are right – what is wrong with many cities not want to enrich developers with re-zoning to build high profit micro units for plebeians to enjoy?

            City officials are elected to represent the best interests of those who live in those cities, not developers or activists of all stripes.

            Increased supply unless MASSIVE will not improve affordability and in fact produce the opposite. Call me when foreign ownership and REITs are banned from owning residential single famly homes and townhomes.

          • 0 avatar
            28-Cars-Later

            It is but it won’t be allowed to pop for no other reason than large funds piling into SFH as an asset class. I read a statistic stating 1 in 7 of all purchases since 2020 were funds, I expect it to be 1 in 4 by 2024 or earlier. There aren’t enough properties as it is and if there is some blip *all* of the funds could eat the paper loss and still cashflow until it recovered. John and Jane Mortgage can’t hence 2009-12 in real estate, this is likely their “fix” to prevent 2008 in the future – bankster criminals own enough of the asset class that the supply will never come online all at once.

            @skotasitc

            Officials are elected to serve their own interests first, then perhaps their city.

            “Call me when foreign ownership and REITs are banned from owning residential single famly [sic] homes and townhomes.”

            Never happen because of the Petrodollar, if dollar holders cannot recycle their dollars the USD will lose its status at some point.

    • 0 avatar
      Jeff S

      Most of these new GMs will not make it till the end of the loan without major repairs. Buyers will be stuck with overpriced lemons and will take huge loses on these vehicles. Dealers will eventually pay for their greed in that if these overpriced vehicles are not worth anything then why would a customer buy another one. I understand why GM has issued this memo because in the long run GM will lose especially if customers go to another brand. GM is not blameless in that it has cheapened the quality of their vehicles to the point that most will not last beyond the loan. The ultimate dealer greed will come back to roost and possibly be the undoing of the dealer franchise model. I would rather order directly from the manufacturer than put up with the dealer nonsense and games.

      • 0 avatar
        FreedMike

        Dealers don’t care. They’re not exactly known for playing the long game.

        • 0 avatar
          Jeff S

          That might be true but then one day they may pay the price for their greed. We might eventually enter an era when there are more direct sales and the need for dealers will no longer exist. Look what has happened to most brick and mortar stores since the rise of Amazon and other online sellers. I don’t want a Tesla but I would buy online if it meant cutting out the dealer. Let me choose what I want within the trims levels, menu of options and exterior and interior colors and types available. With less choice available in options and colors this should not be that hard. Cut the dealers out start by eliminating franchise laws.

    • 0 avatar
      TybeeJim

      The buyer always has the choice to walk away. Cost, nothing.

  • avatar
    SCE to AUX

    I’m starting to see ADMs evaporate on some vehicles I’m watching on cars.com. It’s obvious when the “reduced” price is MSRP.

    Dealers are seeing that people don’t want to pay, so they go somewhere else or shop a different brand.

    Dealers can ask whatever they want; I don’t have to pay it. Such lecturing from the mfrs is hilarious.

    This chapter in car history deflates the arguments about direct sales, where some people think the mfrs will simply keep prices high. You can always cross-shop brands, just as in today’s situation.

  • avatar
    Art Vandelay

    I am sure they’ll be v8 Z06’s at MSRP!

  • avatar
    Master Baiter

    Meh. I don’t have a strong opinion on this one.

    Price is how the free market matches up supply with demand, and I’m generally in favor of free markets.

    Having said that, the first new car I purchased was a 1985 Toyota Celica. I cross-shopped the Honda Prelude but the local dealer was marking up Preludes by $1200, so I went with the Toyota. So these markups will surely turn off some buyers.

    • 0 avatar
      jkross22

      By free market, you mean dealer associations dumping money into political campaigns to defend the dealer model that has more wrong than right with it.

      Or do you mean how dealers ‘wash’ troubled cars through the wholesale system so as to keep passing around the hot potatoes until some unsuspecting buyer winds up with a money pit?

      Forget dealer markups. It’s the screwing of the consumer with lemons that’s a more pervasive and damaging problem.

      Show me the Carfax. Uh huh.

      • 0 avatar
        Lou_BC

        A local dealer has been advertising “As is where is” “You tow away” sales on vehicles that aren’t all that old or look in good shape. They are asking premium prices. Stuff like that would typically end up at an auction for blow out prices.
        The same dealer has Platinum F350 Tremor’s at 10k over MSRP.

        • 0 avatar
          Art Vandelay

          I don’t understand this. It isn’t 1975 anymore. I have seen even a holy grail Ford Maverick at MSRP. It’s called the internet. Even if you have to fly to another state to pick it up, that beats a 5-10k market adjustment. Some people are just lazy.

          • 0 avatar
            Funky D

            I took a 600-mile hike to get a decent deal on a used truck. Probably saved $3k minimum. Thanks Autotrader.

      • 0 avatar
        Jeff S

        Agree this is not a free market because of the dealer franchise laws. A free market would allow buyers to choose between a franchise dealer or a direct sale from a manufacturer. My maternal grandfather in the early part of the 20th century use to go directly to Detroit to pick up his new cars to save money and not pay freight. This was well before WWII. I am not sure if he went thru a dealer which maybe he did but at one time you could buy a new vehicle and pick it up at the factory. Not recommending most of us pick up vehicles at the factory but it seems that in this day and age when you can order things on Amazon that there should be a better system to buy a new vehicle and that it shouldn’t take months or years to get it. The dealer franchise system is archaic.

  • avatar
    Glenn Mercer

    The factories yell when dealers mark up above MSRP for a “hit” product, but are not-so-strangely silent if dealers take a hit to their margins when they have to move a “miss” product they have dumped onto the dealers. Doesn’t it come down to supply and demand? If you ordered a Telluride months ago and got it at MSRP, should you be criticized if your neighbor offered you $2,000 more for it?

  • avatar
    ToolGuy

    “GM reserves the right to redirect your vehicle allocation”

    If a dealer has a constrained model in stock and GM is threatening to reduce that dealer’s future allocation of said model, the rational thing for the dealer to do would be to charge even more for that model while the dealer can. Just sayin. [Supply and demand – look it up]

    • 0 avatar
      ajla

      “the rational thing for the dealer to do would be to charge even more for that model while the dealer can.”

      That assumes the supply is constrained enough that GM can’t make good on their threat.

      If dealer A has Tahoes with a $20k markup while dealer B in the same sales market has Tahoes for MSRP then if GM manufacturing can keep dealer B’s Tahoe supply from going to 0 dealer A’s markup strategy will fail.

  • avatar
    bullnuke

    I’m triggered! Those mean people who sell (and likely own either through a floorplan loan or outright) the cars that I want tell me how much they want to sell it for. It’s not fair that they want so much more money for it than I want to pay! Bloodsuckers!

    • 0 avatar
      ajla

      If the dealers don’t like GM’s letter they can always go open their own car factories.

      • 0 avatar
        Lorenzo

        They can do the same thing I do when I get letters like that – ignore them. I’ve found that if you ignore them long enough, they’ll sometimes send you a “This Is Your Final Notice” letter, and you’re done with them.

      • 0 avatar
        Art Vandelay

        Or 8f GM cared that much about it they could have 8ncluded it in their franchise agreement. As they didn’t there isn’t much they can do besides ask nicely, which is what that letter does.

      • 0 avatar
        FreedMike

        “If the dealers don’t like GM’s letter they can always go open their own car factories.”

        Or stop acting like greedy a-holes. Buyers remember when dealers screw them over, and the manufacturers suffer. The first car I bought with my own money was a ’85 Civic, and I was too young to know how badly I was being screwed, but I figured it out. Flash forward 30 years, and I’d bought five cars without even considering another Honda. It took 30 years for me to even think about shopping Hondas again. The company can thank the original Honda dealership I worked with way back in 1985 for that.

        It’s a lot of short term gain and long term loss, if you ask me. The dealer doesn’t care because it’s screwing over customers as it’s wont to do, and the loser is the manufacturer. GM has every right to be concerned about this.

    • 0 avatar
      Ol Shel

      If the beloved ‘Free Market’ actually worked, there would be dealers willing to undercut the competition, They are making record profits, after all. But, the ‘Free Market’ is just a slogan we’re required to embrace, like Jesus and Freedumb.

      Actually, all of the dealers are keeping prices artificially high. They don’t compete, they… I’d say collude, but I know that’s a trigger word.

      You can say that markets compete tooth and nail to provide the most and the best for the customer, every darn time, by golly, or you can interpret it as business giving the customer the bare minimum on order to keep them from leaving, and even less if the customer has no viable options. It would be foolish to believe that auto dealerships want anything else but to fleece you. And they’re working together to ensure it.

  • avatar
    JRobUSC

    I get that most everyone hates dealers, but dealers aren’t causing this – consumers are. Why would a dealer sell a new car at MSRP (or less) that the buyer is just going to turn around and flip for thousands over MSRP? Especially if the dealer ALSO had to pay some insane amount for the customers trade? Cars aren’t bringing these crazy amounts because of dealers, they’re bringing these crazy amounts because of buyers.

    • 0 avatar
      ajla

      “Especially if the dealer ALSO had to pay some insane amount for the customers trade?”

      Dealers aren’t forced to give “insane” amounts on trade any more than consumers are forced to pay over MSRP.

    • 0 avatar
      Lou_BC

      “but dealers aren’t causing this – consumers are.”

      Yup, those customers coming into the showrooms in their seductive clothing, leather chaps, plunging necklines, and miniskirts deserve it. They are just begging dealers to fornicate them.

      • 0 avatar
        FreezingD

        I don’t care what the markup is. I just want to know the price before I make the time and effort to drive to the dealership. I’ve found that only half of the dealers in my area are willing to give a price over the phone. The one’s that don’t WILL NEVER get my business, period.

        • 0 avatar
          JMII

          This +1. You want over MSRP? Fine just say it. The market is hot right now, inventory is low, I understand how the world works. Instead they hide the real price behind all kinds of packages and add ons claiming they are adding “value” please… give me a break.

      • 0 avatar
        Jeff S

        Let me lend them my handkerchief so that those poor dealers can cry. Just feel so sorry for those dealers its not their fault it’s those greedy buyers. After all it’s free enterprise and that is why dealer franchise laws exist to protect the customer. Thanks but no thanks.

    • 0 avatar
      SCE to AUX

      “Cars aren’t bringing these crazy amounts because of dealers, they’re bringing these crazy amounts because of buyers.”

      Same with sports figures.

      “Football players aren’t bringing these crazy amounts because of team owners, they’re bringing these crazy amounts because of fans.”

  • avatar
    W126

    I’m not sure why any consumer would be in favor of markups on a car that they want. Free market or not, I’m glad I have an ally in my disgust for markups, if it happens to be the manufacturer, so be it. The manufacturers have analysts that try to optimize price points to make the most money for the manufacturer. If a Z06 as awesome as it is, gets marked up to $300,000, it simply won’t sell very much and the manufacturer wouldn’t get any of the markup either. In a way isn’t a manufacturer legally exerting pressure on dealers to not markup part of the free market? Dealers can still do markups, but GM is just telling them there will be consequences if they do, just like if you want a car, the consequence may be paying a markup.

  • avatar

    GM sucks. their own dealers hate them, do not trust them, and partner with any other manufacturer whenever possible.

  • avatar

    Does this mean we can drop a dime on shitheel dealers?

  • avatar

    GM sucks, what a disgrace – (c) Dead(?) Weight.

  • avatar
    jack4x

    The thing about markups is it doesn’t matter unless they all do it.

    I’ve emailed probably 100 dealers to get on their Z06 list, most either won’t commit to MSRP or straight up tell me they will be charging a markup, and I thank them and move on to the next one.

    But enough of them haven’t that I have some options when the cars start to come in. It costs me nothing more than 2 minutes to compose an email, and a one way ticket to anywhere in the lower 48 is an order of magnitude or two less than an ADM. If they can be ruthless, so can I.

    • 0 avatar
      Art Vandelay

      This. People act like they are Clark Griswold down at Lou Glutz Motors trying to get their arctic blue sport wagon versus consumers that have the means to shop nationwide in their pocket.

    • 0 avatar
      mcs

      With a Z06, you could probably go to any dealer anywhere, then order factory pickup. If I end up picking up a C8 (or at the rate I’m going, C9), I absolutely without a doubt would go with the factory delivery.

  • avatar
    Superdessucke

    I’m ok with letting the consumers pay it if they’re willing. Sometimes, the very best lessons are the hard ones.

  • avatar
    Art Vandelay

    If this isn’t a bubble and we are simply seeing the “new normal” I wonder if those stripped down vinyl clad manual crank window adorned hatchbacks half the readers on this site pines for will come back.

  • avatar
    pmirp1

    I got my Tahoe RST 6.2 with no market adjustment. But I had to order it. I guess ordering it from dealer I also bought my 2016 Vette helped. Buying from dealers close to your home and making a relationship matters. I do love this Tahoe, it is a beast.

    Still, when it came to ordering my daughter’s Tacoma, no amount of dangling all cash offer in front of Toyota dealer helped. They still added $2,500 market adjustment for our yet to arrive Tacoma, that is for privilege of waiting for it for 3 months. At least now we have a VIN and possibility of getting it in next 24 days. What I still don’t understand about Toyota ordering at least in southeast, is do we really order or do dealers get some type of allocation. Toyota ordering in southeast is really a black box. They still have very little inventory of anything at the biggest Toyota dealer in Georgia.

    • 0 avatar
      JMII

      Toyota uses an allocation system the last time I checked. Most Asian makes like Honda and Hyundai do as well.

      And yes Toyota SE distribution is almost like a separate company:
      https://jmfamily.com/press-kit/southeast-toyota-distributors/
      They add “packages” to vehicles when they arrive at the port. This where all those Camrys got those gold badges and vinyl tops. I learned this when I worked at a company that printed various internal sell sheets for the junk they offer in F&I office like extended warranties, VIN etching and other worthless crap.

  • avatar
    theflyersfan

    A couple of Saturdays ago, when I pulled the trigger and signed the papers for the 2022 MX-5, I did go Mazda dealer shopping. One wanted $5,000 on top of MSRP for each new car on the lot. It didn’t matter if it was a $26,000 Mazda3 or a $50,000 CX-9. $5,000, bam, take it or leave it. I was also cross shopping the new Civic Si. At the time, there was only 1 in a 300+ mile radius at a Honda dealer near Indianapolis. $10,000 over sticker. Nope. (That makes me cringe when I think about what the CTR is going to be marked up later this year…)

    But the Mazda/VW dealer where I bought my VW wasn’t playing those games, and they wiggled a bit downward because I am a repeat customer. That being said, MX-5s, when supply was low, weren’t the easiest to get at invoice even in good times so I’ll take this as a win.

    But the buyers who are paying over $100,000 for a Hellcat powered Ram truck or $80,000 for a Kia crossover, yikes. That depreciation on a chart is going to look like a stock market crash.

    • 0 avatar
      Superdessucke

      It will and it will be virtually impossible for the buyer to sell that vehicle to get another until the loan is paid off in 8 years or whatever, or they file BK to get out from under it. That is why GM doesn’t like it. But people just seem to have no concept of consequences anymore. This could actually end up being a good thing.

      GM would be better off spending their time lobbying to tighten up bankruptcy laws to prevent some of these people from filing bankruptcy just to get out from under these purchases. I would support that too.

      • 0 avatar
        Superdessucke

        See, what’s gonna happen is that a lot of people will file bankruptcy or default on their loans and then there will be a glut of repo cars on the market, lowering used car values. Cheap used cars will in turn depress sales of new cars. And that will be coupled with consumer aftershock coupled with consumer inability to buy the expensive vehicles being produced. It will be a big mess basically. Problem is GM is using a squirt gun to try to put out a 5 alarm fire here.

    • 0 avatar
      FreedMike

      @flyersfan:

      The dealer just got used to your smiling punim, I guess.

      • 0 avatar
        theflyersfan

        @FreedMike – I still don’t have my own chair and office there though!!!

        With Mazda, I’m hoping the only time the service department sees me is when I’m taking care of the included 2-years of dealer provided scheduled service.

        Superdessucke – I think we are going to be looking at a severe case of haves vs. have nots with cars if this continues another 1-2 years. Need a new car right away? Well, all we have on the lots are severely marked up crossovers and pickups. Need a small car? Here’s a grossly overpriced off lease Honda/Toyota/Nissan/Mazda/Kia. 2 years ago, it sold for $12,000. Now it’s $18,000. So people are going to hang on longer and those who were barely eking by can really be hurt soon by this if they can’t afford to replace their old car with something newer.

        I think this is only a temporary bump upwards in profits for the dealers and automakers. The market is going to tap our and dry up if these overcharges continue.

  • avatar
    BSttac

    Manufacturers can threaten until they are blue in the face, stearlerships are too powerful and can do whatever they want because they paid the right politicians at the right time. Legislation will always side with the stealerships. The loser is always the consumer.

  • avatar
    JMII

    Why did they change their tune? 6 months ago markups were totally acceptable.

    https://gmauthority.com/blog/2021/07/gm-isnt-all-that-concerned-about-corvette-markups/

    • 0 avatar
      Superdessucke

      Because that’s a specialty car that will not bring fallout. Corvette buyers are mostly well heeled and that’s a very small group. And they’ve been doing this so long it’s practically a tradition. Think about the 1978 Pace Car, the 1990 ZR1, and when the new C5 came out. To name just 3 examples.

      But markups have now spread into the bread and butter products. Thats a problem. When things correct, a significant number of those buyers are just going to abandon the car loan. The resulting supply of cheap used cars will depress new product demand, and also pull those consumers out of the market for their increasingly expensive vehicles. Their credit scores are going be awful and they’ll be apprehensive, like a dog that just got whacked on the snout with a newspaper.

      That’s why GM is now concerned. It is not out of the goodness of their heart or to protect the consumer, lol!

      • 0 avatar
        tomLU86

        Abandoning a car loan is bad move for the consumer. Unless they are broke and have to choose between housing, food, medical, and/or car, they are better off keeping the car and eating generic mac and cheese.

        GM is also concerned because some of the irritated prospective buyers will leave, and their top priority will be to NOT buy a GM product. Necessity (or their disappointment at the price of used cars) may drive them to another dealer with another make–that dealer may well fleece them too, but by then, some buyers will have accepted they will be ripped off and just resigned to the reality, and accept their shake-down.

        As to the supply of cars, for readers here who graduated HS in the late 80s, until now, you’ve lived in an era of relative price stability.

        That’s gone. We are now in an inflationary era. This is 1979. Look at car prices from 1978-1983. They skyrocketed–even as American endured the biggest recession since WW2, and sales nose-dived in 1980, car prices accelerated strongly (unlike 1980 model year cars themselves).

        So that’s a huge distortion. The mark-ups may evaporate in 14-months, the actual transaction prices will be similar–or higher on the the vehicles that today are not obscenely marked up.

        • 0 avatar
          28-Cars-Later

          I agree but prior to mid 2020 there were circumstances where it may have been appropriate.

          Years ago I counseled someone who made the mistake of an MY12 KIA Soul which went KIA at 93K due to the design flag in that period motor (Hyundai settled and I think sent $500 damages to all registered owners in 2019). I explained the design flaw and at the time it was still being litigated, I got the wholesale (maybe 4) and suggested they use the money they had (maybe $1,500) to put down on a new Corolla. Then call the bank on the KIA note and tell them you’re going to file bankruptcy and can do 50 cents on the dollar in a payment plan. Then when they rebuked him, hang up and tell them to come and get it. I knew the bank would repo/sell but due to the nature of those wouldn’t get much and try to attach the difference. But knowing that amount was so small, eventually it would be written off and if the guy could deal with bad credit for two years to do so. Nothing honest about this but neither was Hyundai/KIA and the entire banking system is fraud so sometimes you have to play they cards you were dealt.

        • 0 avatar
          Superdessucke

          “Abandoning a car loan is bad move for the consumer. Unless they are broke and have to choose between housing, food, medical, and/or car, they are better off keeping the car and eating generic mac and cheese.”

          Oh snap. You’re right. Then they won’t do it. I’m sorry.

          (ROFLMAO, with tears coming out of my eyes. Please. So is paying 5k over MSRP for an average pickup. And when have American consumers on the whole been good at managing debt anyway?).

          Anyway, I stand by what I’m saying. The consumer will default. Not every consumer of course but a substantial number will, and that is gonna cause problems with the supply and demand aspect of the car business.

          Your point that buyers will be irritated at the manufacturer (versus themselves for being stupid) is, however, well taken. But it is not just GM dealers doing this. They pretty much all are. So that will balance out.

          • 0 avatar
            28-Cars-Later

            Subprime for sure, but its difficult to predict if the defaults would spread up the chain. One thing which was noted in 2009/10 is the car loans did not default in the same way as houses did, because you could live in your big a$$ SUV if needed but could not drive your house.

            Even if there was a default wave, they will simply be repo’d and remarketed. Since the leasing companies/banks are title holders they will park supply and let it trickle back into the block to prevent a sudden supply jump. Because yes they do stuff like that.

            The macro picture is the American de facto belief of motor vehicle ownership is becoming a permanent privilege, which is not by accident.

          • 0 avatar
            tomLU86

            It is a bad move to default on a car loan.

            And a “significant” (that word means different things to different people) number of those buyers will default, I agree.

            We are both correct.

            And 28-Cars-Later point is well taken. While I still think bankruptcy is not good for people with assets, I admit it didn’t occur to me that there are situations where bankruptcy is the best way to go.

            I still predict there will be upward price pressure. OK, pick-ups.
            Today, MSRP =$50k, plus “mark-up” of $10k, perhaps. In three years, MSRP of $65, with $0-5k in incentives. Maybe. And probably sales of large trucks in particular, and vehicles in general may be flat, or even down in three years. We will see. Lots of scenarios, we can have fun here trying to predict.

            One more fact: There are a lot of CY2015-2019 vehicles on the roads, as those were high sales years. CY2020 and 2021 less so. So the supply of less old used cars is on the way to tightening up.

            That fact should help prop up prices and sales in 2-3 years. But what if AVAILABLE disposable after tax income drops because of higher food and fuel prices? Or higher unemployment?

            1980-81, new car prices surged, even as sales tanked.

          • 0 avatar
            Superdessucke

            “But what if AVAILABLE disposable after tax income drops because of higher food and fuel prices? Or higher unemployment?”

            Or there’s an adjustment in the housing market once supply catches up to demand?

            We are seeing record housing prices right now. Somtimes a 20% increase in just a year, or more. There’s just not enough supply. Not only are not enough homes being built, but people are not moving because of the Covid.

            If your house has picked up $100,000 in value over the last year, you might not care that you have to pay $10,000 more for your new Silverado High Country Crew Cab. But once that equity is spoken for and stops growing so fast, or even retreats, you’re not gonna be as spendish.

      • 0 avatar
        FreedMike

        @Superdessucke:

        FYI, if the buyer just walks away from the loan, he’s still possibly on the hook. The lender will sell the car at auction, and will go after the buyer for the shortfall on the loan and fees/collection costs. If the buyer doesn’t pay, the lender can get a judgment and garnish the buyer.

        If the lender writes off the loan, then the amount written off will end up as 1099 income for the buyer.

        It’s a dumb move no matter how you slice it.

        • 0 avatar
          Superdessucke

          @FreedMike – I’m obviously talking with responsible people here. But please note that American consumers have not historically been very good at managing their money and quick to file bankruptcy. Today, it’s common and has much less of a stigma than it did 20 years ago. Watch late night TV for about 10 minutes and you’ll surely see some bankruptcy shyster telling you how easy it is.

          Everybody is a victim after all. If we have a major correctional crash, a lot of people are going to file bankruptcy and there won’t be much of a stigma. But we’ll all end up paying, especially if the government has to bail D3 out, again.

          Personally, I would bring consequences for actions back into vogue by tightening up the Bankruptcy Code. Add real estate and automotive loans and leases to the list of non-dischargable debts. Why? Not because I am mean but because defaults on these large types of debts are much more damaging to society as a whole. I bet that would lower the number of mortgage foreclosures and car loan defaults considerably!

          But of course, that won’t happen. There is currently a bill to actually go in the other direction by making even student loans dischargeable. So this being the state of affairs, I stand by my prediction.

          • 0 avatar
            FreedMike

            @Superdessucke
            “Add real estate and automotive loans and leases to the list of non-dischargable debts. Why? Not because I am mean but because defaults on these large types of debts are much more damaging to society as a whole.”

            How would discharging a mortgage in bankruptcy harm society? I’ve been in the mortgage business 20+ years and I don’t see how. The lender will simply make whatever repairs are necessary and resell the property.

            In fact, I’d argue that NOT discharging the mortgage would lead to foreclosure, which IS far more damaging. Why? Because foreclosed properties end up sold at auction, and they generally sell for far less than they would under normal circumstances because they property is typically in rough shape.

            And when that happens, the value of all the homes in the area drops. Why? Because the valuation of properties is based on comparable sales. If a bunch of those sales are foreclosures, then that drags down the value of everyone’s house. That’s a HUGE piece of what happened in 2008-09 – there were so many FCs that the people who were paying on time ended up underwater. Many of them were stuck in adjustable rate loans they couldn’t afford anymore, and couldn’t refinance to a fixed rate product, so they ended up in FC too. it was a self-propelling cycle. The introduction of HARP loans, which allowed you to refinance if you were underwater as long as you were paying on time, helped that greatly.

            If a mortgage ends up discharged in BK, then the values of the surrounding properties end up unaffected.

    • 0 avatar
      FreedMike

      I see markups on a low-volume halo car that costs a lot of money regardless of whether it’s marked up or not. But we’re seeing stupid markups on family vehicles as well.

  • avatar
    eggsalad

    Okay, so dealers won’t mark up the price tag over MSRP. Instead, they will insist you take the TruCoat and nitrogen tire fill package for $10,000.

  • avatar
    AK

    When I was trying to place an order for a 22 BRZ back in December, I had a few local dealers tell me there was $4k, $5k and $6k markup on them. One dealership (Gerald Subaru in Naperville Illinois) was extremely rude about it.

    I ended up sending off emails to all of the top people at Subaru North America and the next day I received a call from a rep at Subaru NA customer service who had my email forwarded to them by the senior vice president that I reached out to. The rep said he got the email from “someone high up” and he was instructed to help me find a car for MSRP.

    I ended up finding a car myself and Subaru gave me a $500 parts/service voucher for my troubles.

    Long story short, every day for the next 2 weeks, I received calls from Gerald Subaru, trying to smooth things over with me. I got the manager, the president and eventually the owner of the dealership leaving me voice mails, all wanting to talk to me so they could “make things right by me”. I never talked to them or called them back but I did enjoy the fact that someone from Subaru got in their ass about trying to charge $6k + $1300 dealer add on for a car that costs $29k.

    • 0 avatar
      bullnuke

      AK – I’ve contacted various manufacturers over the years (regular mail or telephone in the old days, email or text these days) concerning issues with their product or dealerships. Only one out of the many has taken action, and I mean within four days action, concerning issues with a dealer – Subaru North America. I was getting a run-around from the local Subaru dealer who proudly says that they are the 11th oldest in the US and was treated a bit unprofessionally when I wouldn’t fall for their condescending crap. A simple email to Subaru in New Jersey got me a return email that same day and, four days later, a very respectful invitation from the problem dealership to come on in and get things taken care of. The change in attitude was remarkable at that dealership and, though I only see them every couple years or so for parts, they still remember me at first sight by name and treat me very well. And Subaru in New Jersey contacted me three times after that incident to ensure that I was pleased with my experience and their product, a lowly base model, 6MT Outback 2.5i. I haven’t gotten a response from the manufacturer of any product that I’ve purchased as what I received from Subaru.

  • avatar
    FreedMike

    Well, if you wonder why the dealers pay millions of dollars to stop direct-to-consumer sales, here’s the reason.

    Too many of them are just greedy clowns. The only people who would miss them are the politicians they pay off.

  • avatar
    MitchConner

    A manufacturer shouldn’t care if a dealer charges an ADM. If someone’s dumb enough to pay it, let them. Smart buyers will simply walk to a dealer with a reasonable price. If they’re so concerned about ADMs, then amend their contracts to require no haggle pricing at sticker a la Saturn.

    The really shady stuff that manufacturers need to stamp out is this crap where a dealer accepts an order for a hot product, like the full-sized Bronco, finds out there are people willing to pay more for it than what their order in hand has — so they go back and tell the initial buyer “if you don’t pay X more you lose your order.”

    I don’t even know if that kind of trash is legal. It stinks and needs to be stopped.

    • 0 avatar
      28-Cars-Later

      I don’t think they do care but its bad optics if they don’t pretend otherwise.

      Interesting idea on the pricing change, there was one erstwhile gentleman who would argue with you till the cows came home (Ruggles).

      I agree with your final point but we lost whatever rule of law we had in the plandemic.

      • 0 avatar
        MitchConner

        My future in laws have a high end Bronco on order through Ford’s X plan.

        They read about the shens going on and called asking what to do if their dealer did that to them. Told them to talk to their dealer contact and ask if they had any plans on amending their deal. Dealer said no — going so far as to have the owner send them a note stating so.

        Also told them to walk and reorder elsewhere if their deal was changed.

  • avatar
    Superdessucke

    Remember, the D3 made a huge bet well before the pandemic that lucrative SUV’s and crossovers would be a big enough future market to abandon their entry level vehicles. This disturbing markup trend, where consumers are suddenly paying massively over the already high MSRPs, really threatens that.

    The D3 will not be able to react very well if this goes sideways. Too many eggs in the high end gas guzzling basket. They are way behind. And quite honestly, I think this time, the government should just let them fail. Smaller companies are coming online, and makes like Hyundai, Kia, Honda, and Toyota made better product decisions and can fill in the gaps. It will be painful for a while but I think this has to happen. No bailout this time. Please.

    • 0 avatar
      28-Cars-Later

      “The D3 will not be able to react very well if this goes sideways. Too many eggs in the high end gas guzzling basket. They are way behind. And quite honestly, I think this time, the government should just let them fail.”

      Brandon fixed his wagon to them, EV, and the UAW so there is no way they would let them fail. Paradoxically, the administration recently put in force the Obama era fuel economy CAFE rules for MY23… yes the one that comes out in five months… so its almost as if he wants them to fail.

      • 0 avatar
        Superdessucke

        Brandon’s not gonna be in office for very long. So if we get a socialist like Bernie in there, or, more likely, a TBD from the Republican party, that could be a deal breaker for the D3 and fix their wagon v hitch it. I do agree that Brandon would save their bacon in a heartbeat, or sooner.. But I don’t think the fallout is gonna come until after he’s out of office.

        • 0 avatar
          28-Cars-Later

          I obviously don’t have a crystal ball but that could be as soon as 2023 based on the Kamala replacement theory floated last fall which could be taking shape (theory: Kamala is a disaster so they “promote” her to the SCOTUS and replace her with the choice they wanted but didn’t run in 2020. Because *they* choose the leadership, not “the people”).

    • 0 avatar
      Jeff S

      Agree Superdessucke. I reluctantly supported the 2008 bailout of GM and Chrysler but now I would be for no loans and no bailouts. Let them fail but then I am willing to bet the Government would still bail them out and this time it would likely be Ford asking for a bailout along with GM and Stelantis. I think that eventually the prices on the big pickups and big suvs will reach a point where sales will decline especially with the Fed saying they will raise interest rates several times. This would hurt GM,Ford, and Stelantis but it could help Hyundai, Kia, and any Chinese companies with lower priced ICE and EVs. Even with the Maverick Ford is not able to meet the demand and will likely raise the price several times leaving an opening for companies with less expensive vehicles.

  • avatar
    ToolGuy

    I am interested in obtaining a new Kia Telluride EX in Black Copper for $200 under invoice (willing to pay less). No add-ons, no trade-in, no financing. The winning dealer will deliver the vehicle to my home at a date and time of my choosing (last Tuesday at 11:17AM sounds perfect) at no extra charge.

    If you are interested in earning my business, please leave your contact information here and I will have my people not contact your people.

    Have an amazing day!

  • avatar
    ponchoman49

    Comical. What could possibly go wrong with an all electric Silverado? From the makers of the Vega, the converted gas to diesel Olds V8, the 8-6-4 modulated displacement V8 that was 20 years early, the HT4100 disaster, the Cimarron, the Northstar, the intake manifold/Dexcool madness, Saturn, the W-body blunder, fire catching Bolts and so many more missteps and mistakes.
    How anybody in there right mind would even consider plunking down up to 105K for a Silverado defies logic. How they would consider plunking down 105K for any vehicle made by GM is even more crazy.

    • 0 avatar
      28-Cars-Later

      Corvette is the only exception, the value it delivers is still cheap for the class of vehicle.

      Also, Saturn could have worked if implemented differently and given corporate support. I hate to say it but had Saturn been a Chrysler project it probably would have been far more successful given the state of the company prior to the “merger of equals”. Imagine if the derided but also beloved K-car has become “Saturn” but with the new platform and spaceframe then sold through conventional dealers?

    • 0 avatar
      Jeff S

      I predict the Silverado EV will be so hot it will burn your house down.

  • avatar
    rosstex1

    The fact is, a fool and his money are soon parted. an automobile is only a necessity for some, others it is a luxury or even a liability. If it is any of the three, there is a long list of automakers that make perfectly dependable transportation with a style to fit your need. Just because someone wants to be the first to be seen in the hottest, newest model, you might find that extra $15000 you paid instead of waiting a few months means you very well may be the last person to be seen driving that worn out, poorly engineerewd POS since you could not get out of that 96 month 17.9% interst loan you were so eager to sign. i ihinestky dont blame the dealers or the salespeople. the manufacturers have taken so much profit out of their vehicles and delivered some horrible cars to them to be sold, make it were you can. the dealership is expected to keep up to the demands of the manufacturer, build the newest and nicest dealerships when they have a lot full of cars that will only sell with dealer rebates or factory rebates because they arew not worth owning. They strip out all profit and leave a few hundred in the dealers coffers and $50 in the salespersons pocket, if the dealer didnt have a deal to pay the salespeople more for each one of the boat anchors they could sell. Ameerican car manufacturers are the worst. they continue to deliver underwhelmi n designs, poorly manufactured and riddled with issue tto the dealers and they are watching the asian car companies putting out amazing fresh models they have waiting lists for them. so when ,let say, GM hits a home run with a new model(or maybe a triple since we expect there to be quality issue) and have the chance ti actually make some money, i saay go for it. there is a fool born every day! or maybe, some people have more money then sense. The people that are willing to pay dealer markups will always be waiting to buy nragging rights. no one forcesthem to make a bad financial choice. who am i to deprive them of the joy of paying $150 more per month for an extra 12 months than i will pay for waiting 2-8 months. that $10000 may be just what they think being sen in that new car 8 months be for me is worth. even better, they can go buy someone’s waiting position for that new vehicle on ebay and pay someone whose accomplishment was getting to be 5th on the delivery list for al their hard work. That being said, anyone want to puchase the first delivery posiition of the all new Chevrolet Disappointment? I mean Come on GM, i greww up with you, stuck thru it with the 90’s and 2000s just to get the chevy bolt or watch you keep using that tired gigantic buick logo on every model sold. and then discontinue Holden, who was apparenty the only division that knew how to design a great looking car!! have you ever just walked out on the streetand asked people what they think of your line=up. you are so close to getting back in the game and if hyundai can revive their image from the horror show for them that was the 90’s and together with Kia make every slap every other manufacturer in the face with their designs of the last several years. i think you can do better than the spark or encore or that hideous Chevy HD pickup. just actually ask people. from what i see in your designs, ask a lot of people. Better than that, i am lookimg for a newjob, i have a long list of the things you need to stop doing to make these vehicles so repulsive. to get paid to tell you to trya hgain rvrty dsy would be awesome. I do have to say hats off to Fiat Chrysler! i know, not something you hear often! they have managed to take cars that were designed over 15 years ago and keep them looking fresh and selling great. a dealer mark up on a 2021 Jeep wranglerjust beause you made it a hybrid or 2022 challenger widebody hellcat?? yes please i want to go to there!.the challenger, not the wrangler. i am still driving my 2010 R/T classic because i got it a week before my buddy. and sdly, one model year before the much needed interior upgrade! but in just 3 more years i can trade it in! Moral of this story, its their money who cares? how can anyone think it is predatory to mark up your merchandise? an item is worth what someonwe is willing to pay for it afterall…

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