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Discussion Starter · #1 ·
Something I've been wondering. I know dealer mark ups have been a thing for a long time with certain cars while the demand and hype is high. I've been wondering, why are dealers allowed to charge over MSRP for cars? There are plenty of other products that get released where the demand is high and the supply is low. One example being the Playstations and Xboxs. They would sell out immediately and remain sold out for months, people would buy them and charge a mark up on ebay, but the retailers would never sell them over MSRP. You'll never see Bestbuy or PCRichards selling a product over MSRP because demand is high and supply is low. So why is it okay for dealerships to do this? What makes dealerships different?
 

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Same reason so many consumers buy so many cars for so much less than MSRP.

How much less than the most enthusiastic buyer is willing to pay should you be allowed to charge when you decide to sell?
 

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Discussion Starter · #3 ·
Same reason so many consumers buy so many cars for so much less than MSRP.

How much less than the most enthusiastic buyer is willing to pay should you be allowed to charge when you decide to sell?
I'm not sure I understand what you're saying in the second part. Products at electronic stores also sell for under MSRP at times, but I've never seen more, no matter what demand is.
 

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I'm not sure I understand what you're saying in the second part.
Clearly not.
You’d expect to be able to charge whatever the market will bear but think certain others shouldn’t enjoy the same freedom?
Products at electronic stores also sell for under MSRP at times, but I've never seen more, no matter what demand is.
And all sorts of homes sell for significantly more than the sellers’ asking prices. So?
 

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I think it's dependent on the agreement the companies put out on some products.
Like your example, I think Sony and Microsoft restrict authorized retailers from charging more -- so the retailers get you on the warranty :)
Apple does the same thing -- they don't want to hold a press conference and say the new iPhone 42 is $1k and have the vendors all selling it at $1.5k.
I think most vendors would mark up any high demand item they could. The companies, however, have already forecasted their profits on selling x # of units at x price --- they want the units more than they want the vendors to make more money. If anyone makes more money, they want it to be them lol.
I don't think any of them does anything about people buying and reselling their product for more unless it's in bulk.

Seem like I remember seeing something about Ford controlling dealer markup on the Mach-E - so it's not unheard of in cars as well.

You see mark up in many areas, any of the wholesale warehouse stores sell lots of items to businesses that resell them for a profit.
 

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Discussion Starter · #6 ·
Clearly not.
You’d expect to be able to charge whatever the market will bear but think certain others shouldn’t enjoy the same freedom?

And all sorts of homes sell for significantly more than the sellers’ asking prices. So?
Homes sell more for asking price because people offer it, not because the sellers are asking for more than what the house is worth. There's no msrp for houses, just appraisals, and if you're getting a mortgage for a house and try to spend much more than what the house is valued at, the house may not appraise and you may not get the mortgage.
What freedom are you talking about? The retailers I mentioned don't have the freedom to charge whatever the market will bear, they sell at MSRP, even if people are willing to pay more. The products that sell more than MSRP are bought at MSRP, then resold. Like buying a new car from a dealer, then the owner selling it for over sticker vs buying an xbox at MSRP, then the owner selling it for over MSRP. The retailer for the product like an xbox doesn't have the freedom to charge what they want, they charge MSRP. Why do dealers have these freedom to sell products for whatever they want when retailers of other goods don't?
 

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One main reason is dealerships have a monopoly on distribution of the product. You can't get a GT500 brand new from BestBuy or PCRichards. Ford is a less good example here (but in some ways still relevant). In Seattle, there are basically 2 Porsche Dealers. If you widen the radius to 200 miles, you add ~2/3 more (Portland). Manufacturer restricts supply to a market, you have have 1-2 options to buy.

Second, MSRP = Manufacturers Suggested Retail Price. Key word is "suggested", not directed.

Third, a standard Playstation or Xbox isn't special in and of itself. The GT500 for Ford is equivalent to the GT3RS for Porsche, CS models for BMW, Black Series for MB, etc. They will never make many thousands or 10s of thousands of these cars per year. These are enthusiast halo cars.
 

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And all sorts of homes sell for significantly more than the sellers’ asking prices. So?
The housing market dynamics is a perfect synonym here. A structure on land can have drastically different prices over time. Right now in Seattle, houses are going for up to 20% over asking, and sometimes more. Most times selling for more than the house is "worth" (which I read as MSRP). People pay it because, if you want a house and you need it now, thats the price.
 

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Discussion Starter · #9 ·
I think it's dependent on the agreement the companies put out on some products.
Like your example, I think Sony and Microsoft restrict authorized retailers from charging more -- so the retailers get you on the warranty :)
Apple does the same thing -- they don't want to hold a press conference and say the new iPhone 42 is $1k and have the vendors all selling it at $1.5k.
I think most vendors would mark up any high demand item they could. The companies, however, have already forecasted their profits on selling x # of units at x price --- they want the units more than they want the vendors to make more money. If anyone makes more money, they want it to be them lol.
I don't think any of them does anything about people buying and reselling their product for more unless it's in bulk.

Seem like I remember seeing something about Ford controlling dealer markup on the Mach-E - so it's not unheard of in cars as well.

You see mark up in many areas, any of the wholesale warehouse stores sell lots of items to businesses that resell them for a profit.
So basically, the manufacturer in this case allows it
 

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MSRP, Manufactures SUGGESTED Retail Price, name says it all. As for retailers, some enter into contractual agreements for the selling price and some dont. Home electronics and TV's are a prime example. I am sure you have shopped a TV or whatever and stores have different prices. Some stores also then have price matching and others refuse to match say a Club Store price, because they (Club Stores) are usually buying in bulk at a lower wholesale price.
 

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Free markets and supply and demand is the short answer.
 
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Nobody says you can't bargain with them.
My 2020 GT350 was first offered to me at $2,500 over. I hassled them over the course of a week and got the offer down to $1,500 over, then down to $1,000 over.
All along they kept telling me they had a dealer trade worked out and they were getting $1,500 over from that dealer.
In the end they "confessed" that it would be better for them to sell it to me @ msrp than to take the hit for doing a dealer trade.

Now I don't pretend to understand all that's involved in dealer trades and how it affects their future ordering allotments, but I am a happy new owner of the car. 😁
 

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Free markets and supply and demand is the short answer.
Actually this isn’t correct as this discussion proves that other products sold in free markets are not allowed by the manufacturer to be price manipulated such as the iPhone example. IMO these games that dealerships play will be looked at in the future as to why they no longer exist. In the end they will only have themselves to blame for their demise.
 

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Discussion Starter · #15 ·
Nobody says you can't bargain with them.
My 2020 GT350 was first offered to me at $2,500 over. I hassled them over the course of a week and got the offer down to $1,500 over, then down to $1,000 over.
All along they kept telling me they had a dealer trade worked out and they were getting $1,500 over from that dealer.
In the end they "confessed" that it would be better for them to sell it to me @ msrp than to take the hit for doing a dealer trade.

Now I don't pretend to understand all that's involved in dealer trades and how it affects their future ordering allotments, but I am a happy new owner of the car. 😁
I try to keep it short, I spoke with A LOT of dealers. Like mentioned here, most salesman don’t know the car would have a mark up. One salesman today said his dealership doesn’t play the mark up game and the car is MSRP. I told him I’ll put a deposit on it for sticker. He said okay, put me on hold, came back and told me the manager told him the car would be $5K over sticker. He sounded embarrassed and was apologizing. I kind of felt bad for him believe it or not, I could tell it wasn’t his call. I thanked him and told him if anything changes and he can sell it for sticker, to call me back and I’ll gladly buy it.
 

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Discussion Starter · #16 ·
Actually this isn’t correct as this discussion proves that other products sold in free markets are not allowed by the manufacturer to be price manipulated such as the iPhone example. IMO these games that dealerships play will be looked at in the future as to why they no longer exist. In the end they will only have themselves to blame for their demise.
Thank you. Some of the marked up cars are already starting to come down, I saw a couple of price cuts on cars.com today. Just wait until the end of the summer and things get announced like the Z06. That’ll divert some of the attention
 

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I bought my 21' for 4K over sticker out the door; tax, title, fees, window tint, GAP, extended warranty, and some other extras. I think I did well.
 

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Actually this isn’t correct as this discussion proves that other products sold in free markets are not allowed by the manufacturer to be price manipulated such as the iPhone example. IMO these games that dealerships play will be looked at in the future as to why they no longer exist. In the end they will only have themselves to blame for their demise.
My points were intended to be general. Generally speaking, in a free market, manufacturers/sellers determine a price they would like to sell something for and consumers can choose to pay the price or find an alternative product or seller. If the manufacturer/seller loses enough sales b/c of its pricing to other competitors, than the seller loses and ultimately no longer exists. And supply and demand -- well, that's pretty self explanatory at this point, given shortage of new GT500s.

Not trying to lecture, just clarifying my point. Actually, I don't think we are far apart on our views. I personally don't like dealers that are charging ridiculous markups on the GT500s, but if someone is willing to pay it, then so be it. I won't be.
 

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Yes... free market and supply vs. demand sums it all up. Here is another way to look at it... suppose there were only 100 “widgets” made. The price of the widgets are fixed at $10k. You want one (badly) and would be willing to spend more to secure one, but all 100 widgets sell to the first people that slapped down $10k. In this case, a buyer willing to spend more was locked-out and the seller missed on additional sales $ because of the fixed price. In a free market, retailers can set their own prices. Potential buyers can chose to move to the front of the line by paying higher prices... in this case, both parties involved leave happy.

I paid a markup to secure my CFTP. I was happy to land the car and the dealer was happy with their additional profit. If they, and all other dealers, offered their CFTPs at MSRP, it’s possible I would have had the funds as a willing buyer, but locked out due to first come first serve.

I have zero problem with ADMs. If no one steps up to the plate, market forces will push the dealer to lower prices until a willing buyer is found. This is freedom. Price fixing is akin to socialism.
 
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