I think that the manufacturers should have let dealers sell the cars for whatever they wanted to price them at and by forcing them to sell them at MSRP they have created a bigger bubble!
I follow private auto auctions on Bring a Trailer, Cars and Bids, mbmarket Etc. Recently there have been loads of RNM (Reserve not met) auctions specifically on BAT. The market is starting to show cracks(specially on run of the mill european cars). But most interestingly is all the new(ish) car auctions. The Broncos, the Lightnings, the hummers. Often times, the people winning these auctions aren’t regular buyers… It’s Dealerships!
That’s really interesting because normally these private auctions go for top dollar among car enthusiasts. Typically Dealers will take a low mileage trade-in or something specialty that they pick up at the closed dealer-only-auction(Manheim or similar) and sell it on BAT for top dollar. The fact that they are getting their inventory from BAT and are still able to mark it up more and make a profit is mind boggling. But it also tells me two things:
1. The people who want these cars aren’t the car enthusiasts, because if they were they would just buy them from BAT and cut out the dealership middleman. They are your jump on the bandwagon people who have to have the latest and greatest, keeping up with the Jones type of idiots.
2. The demand for these new cars is artificially high because so many people are buying the car just to flip it and sell it for even more than they paid for it. However, they are selling it to a dealership which then marks it up even more and sells it again to the final buyer who is the actual one who wants the car.
All this is caused by the manufacturer trying to force dealers to sell the car at MSRP. I’ll use the example of the Ford Bronco. Most of the reservation holders that got the Bronco at MSRP from the original dealer, didn’t actually want it. They just wanted to make some cash. If they were going to have to pay a marked up price they wouldn’t have bought it and the dealership would have been able to sell it to someone who really wanted it, and was willing to pay the price for it. Which first would have been the read die hard enthusiasts and then the keeping up with the Jones Idiots who surprise, surprise doesn’t plan ahead well and didn’t get on the reservation list.
By forcing the dealers to sell at MSRP the enthusiasts got their Broncos, but so did a whole bunch of people who just want to flip them they sell them back to the dealerships for OVER MSRP. And the Dealerships sell them to the idiots who have to always have the latest. Which is worse, people paying over MSRP for a Brand new car, or people paying over MSRP for a used Car?
By forcing new sales at MSRP it created the latter. You have these cars getting sold 2-3 times before it gets in the hands of someone who is going to keep it… That increase in demand is driving up the prices even higher and for longer than it would have if the manufacturers just let the dealers sell the cars at a mark-up to begin with.
I don’t see this ending well. Sooner or later manufactuer inventory is going to catch up with demand or there is going to be something that makes these idiots sell their car because remember after all they are idiots and don’t make good financial decisions. It could be some other new car that they want more, or perhaps with increasing costs they decide to part ways and get something cheaper or maybe even they get laid off and rather than lose their house they decide to dump the car instead.
With the increasing interest rates and tech industry starting to shed employees I think the time is nearly here. My question is… How can I profit off it other than buying a tow truck and starting a REPO company?
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>There are a few ways to profit from this situation:
1. Short the stock of companies that produce these cars. This will allow you to make money as their stock prices fall.
2. Sell your own car while it is still in high demand and before prices start falling.
3. Buy a tow truck and start a repo company!
This is not even close to accurate. New car dealers have been charging *over msrp* for over a year now for new cars.
Letting them charge whatever the fuck they want based on market conditions would have allowed them to charge *even more*, allowing banks to loan people even higher than the 140% LTV amounts they’ve been doing since the pandemic hit. You know what happens when those dopes who bought more car than they should have been allowed to buy based on their debt to income allowed default on those loans? The bank has to repo them, and try to recoup their losses at auction. At that point, they’re not even going to get msrp, which would be a blessing since they’re basically over leveraged on those assets. They’re going to get *maybe 70%* of msrp. A pretty far cry from the 140% of MSRP they originally loaned. It’s a mini housing market meltdown of 08 already and what you’re suggesting would have made it even worse.
Source: worked at a dealership during the pandemic
Biden just launched chip shortage 3.0 (chip wars w/ China). Do you think they won’t make money in the next few years by snatching up inventory? That and the fact that inflation is still a thing.
We have nowhere near domestic manufacturing capabilities to meet demand and south Asia (the place where we get chips) will be a geopolitical mess with locked trade routes.
At this point I think there’s nothing else in this administration’s agenda besides making all of us work behind the Wendy’s dumpster.
Oh yeah, and I forgot to mention the idiot in California that’s locking up the ports with his policies.
Wait until they charge more for that peanut butter you buy to smear on your a$$, not that peanut butter is bad or anything but ya know
OEMs are starting to say you have to keep the car for 3 years or the warranty is void.
We are not forced to sell at MSRP. We just do because we have no inventory.
I’ve sold quite a few at MSRP, but I’ve sold quite a few below MSRP recently.
Dealers sell the car(and just the car) at MSRP. They sell their own add-ons and services and “lot processing fees” at massive markups, if they actually have any stock. So it goes.
Luxury watch market has been doing this for years, although without the hazard of financing underneath.
Everything will end badly.
What’s making it tough is manufacturers raiding invoice to the dealer very close to msrp on the window sticker for some models. There is precious little profit on some models at window sticker so dealers are holding firm or adding market adjustments yo make a profit
Vehicle market is so jacked…When it finally runs out of fools willing to sign overpriced contracts its going to be an epic bust of historic proportions.
I really hope so, the i7 is coming December first week
They are trying to charge 5k over MSRP at BMW of Bayside.
The MSRP is 140, nicely loaded I was hoping to get it for 135
A few key points you missed entirely….
1. MSRP sale is not a requirement, its suggested. Its illegal to make someone sell a product for a specific price.
2. Imagine the reverse of the this market (which is how the car market is 99% of the time) over supply with high priced vehicles sitting on the lot
3. Dealers dont really own the vehicle, the finance them at a price of 1% of MSRP per month sitting on the lot. Think of it as they use options on the price of cars with a 1% theta tax.
4. Your perception of how they make money on the sale is incorrect. Even invoice price is not the true cost of the vehicle. There are many incentives from manufactures based on volume or customer satisfaction that are essentially rebates back to the dealer after the sale referred to as “Trunk Money”
5. All dealers are franchises and are therefore bound to franchise agreements.
6. Most dealerships loose money in the sales department, then make it up in the finance department.
7. Interest rates will slow demand, thus flipping houses and cars will become not profitable. History always repeats itself.
8. BAT, ebay and other auction sites charge high rates which must be factored into the sale price of the vehicle by the consumer and seller. When it becomes expensive they move to cheaper platforms like autotrader or craigslist.