Based on all other comments I have an unpopular opinion: I think this is fine. If 10 people want to buy 1 car, how do you choose which person gets it? You raise the price until there's only 1 person. How else would you do it?
The concern is not that. Yes increase price if demand is high and supply is low.
However, they play those games where they advertise one price but actually have tons of mandated fees when you show up to purchase. So it makes shopping around very hard, you can’t compare between 2 dealerships as even calling them won’t give you that info. It’s predatory and anti consumer.
This is literally the process of purchasing a vehicle in 2022. I needed a car (My old one had broken down after 9 years of service)
Advertised price was 24,500. I walked out totaling 30,000 after all the bullshit and that was with a 4000 downpayment. I left an honest review on Google Reviews about how misleading and unhappy I was with that dealer in particulars process but I loved the car so I just sucked it up.
When we bought my wifes car I had a much better experience. Some dealerships are just sleazy, and if you need the car you need the car.
That's the entire point of these crappy business practices. At the end of the day, you paid. Thus they continue doing the same thing.
If you really wanted this to change, don't reward the bad business practices.
(Side note: This is a common topic on reddit /askcarsales. Honest dealers are basically forced to do some of these things. The shady dealers advertise lower prices, but lots of fees. So uninformed consumers show up at good dealer and say "Look ShadyDealer has this exact car for $5,000 less! GoodDealer tries to explain, consumer gets mad, etc. etc.)
> That's the entire point of these crappy business practices
Exactly. They're trying to find the maximum you'll pay. It's like when you click on "Enterprise" plan on a SAAS company - time for a sales rep to Google your company, see the nice share price and give you a "custom" quote.
Enterprise sales can be a long process because of the procurement process at the company. You can be looking at a 9 month to 3 year sales cycle, where a sales person is going to be involved the entire time answering questions, having security assessments completed, responding to quotes from other companies, etc.
You're going to have more conversations about special implementation requirements, integration with an obscure system, special support, training and compliance needs, etc.
For a long time I've believed that every company really needs 2 "enterprise" plans.
1. Standard Enterprise
- Yes we have SAML
- Yes you can have massive discounts on overages
- Yes you can get a copy of our SOC2 Type II if you sign an NDA.
Price: $X / [month,year]
2. Custom Enterprise
- We'll complete your custom security assessment document
- Discuss special options for training and support
Usually, I would say buy a used car then... but right now, used cars are ridiculously priced too! The used car dealerships are making money hand over fist too, and some people are out there paying ridiculous prices for old cars, probably because of the wait times on new cars. And you know the dealers are lowballing the fuck out of people who don't know any better, and asking stupid prices.
It also doesn't help that every manufacturer has basically stopped selling their low-end small cars. No more Honda Fit. No more Ford Fiesta or Focus.
The thing is, I don't think that most people buying cars right now even 'need' them. So people like you who do need one are also getting screwed by that.
When I negotiated to buy my most recent car online back in 2016, the term to use was 'final out the door cost'.
I reached out to maybe 7 or 8 dealers, had a couple that refused to provide a total itemized cost, and then got back 5 quotes that varied quite a bit (like $7500 on a $30k car).
Did one round of negotiation which ended up lowering the lowest price another thousand bucks or so and went with that dealership.
When I bought a car in 2015, I called around asking for the out-the-door price. I told the dealer that offered the best price that I was on the way. When I got to the dealership, I realized I was at the wrong one. I called the dealer to tell him I accidently went to the wrong one, the sales manager was standing there next to me and said we can beat their price, and I told the guy on the phone, they went back and forth a couple of times by $100 each instance. I ended up staying where I was and buying the exact same (common) car there.
When I bought a truck in 2019, there was only one in my state that had the features that I wanted (I did not tell the dealer this). I tracked down the fleet/internet sales manager's email and emailed him asking what the Out-the-door price without incentives was on that VIN, then when it came time to do paperwork, I told them to apply incentive codes XXXXXX and YYYYYY. They tried to add on a dealer package for $1500 (I laughed when they explained it to me: nitrogen-filled tires, VIN etching on the windows, tint on the rear windows, and security lug nuts, I said we're breathing 70% nitrogen right now, and you can buy a VIN etching set online for $10), so I kept saying "no" until they asked if I could do $150 which was their cost, and I said yes to finish the deal.
I told the salesperson that I understand they have to make a profit, and I have no issue with that, that they probably made $1500 to $2000 after the manufacturer volume incentive, and he said they only made $800 off of me.
Things are drastically different now. Bought a 1 year old car for cash last year after an accident totaled my old car. Dealerships have no/low inventory. We had cars sold when we were on the way to the dealership to test drive them. Any negotiation was laughed at.
You're lucky if the dealership actually has the car. Indeed, you're lucky if it's even been built yet. I was able to get the car I wanted for a not unreasonable price but I did have to wait 6 weeks.
Yep. Wholesale prices for desirable used cars are now often more than the new MSRP and they sell instantly. Especially for things such as the RAM TRX trucks, RAV4 Hybrids and any EV.
the golden rule for having leverage in negotiations is the ability to walk away and not close the deal.
You can apply the pressure by thanking them for their time but their number is too high compared to the competition and I guarantee the car salesman is going to be calling you back with a better deal.
Any sale is better than no sale, they make money selling cars by volume and will take less profit to close a sale, you don’t know their profit margin so let them eat into it to close the sale at a later time by walking away! If you don’t have time, they will play on these fears to make you think you must sign the paper that very second or you are missing that deal of a lifetime.
Also, you can flex carvana prices and be like, I can buy a car through carvana on my phone cheaper than you guys, then simply tell them you are walking away cause of that and see them magically go talk to their manager and get a better price for you right then or later on the phone, I pulled this off a couple times before. You can figure out their profit margin and markup and see if you can get them to lower the price and still make money. Win-win
I just bought a new car as well. It turned out that the "in transit" car had obviously not been built yet. Paperwork charges were a bit high and there were some mostly BS "factory installed options." But MSRP was MSRP and I was actually able to get the charge for the options added to my (already pretty good IMO considering) trade-in price. The main pain was that I had to wait 6 weeks when I had some issues with my current car. But then I went in with the attitude that I was probably paying sticker and would be happy to just get the car I wanted so things went pretty smoothly from that perspective.
Having worked at a car dealership some number of years ago I was surprised and amused by the way that this business has been soaked in (what would only recently come to be referred to as) dark patterns for so long that they have acquired an almost folkloric categorization scheme, with pithy, locally conventional names identifying almost every well-worn dark pattern sales track. The one they'd use internally to sum over your experience above is "sticker is quicker."
I think my favorite out of all of these was "grapes;" the term used by Ford salesmen to refer to fiercely brand loyal pickup truck buyers. juicy and easily squeezed.
This is pretty much 98% American and it's everywhere. I took a lyft cab to O'hare this morning. The quoted ride was $28. The final price was $38. The itemized list was too long to read.
> they advertise one price but actually have tons of mandated fees when you show up to purchase
I had a similar experience booking a hotel room recently. Despite advertising a rate of $x, when I'd click through to complete the booking, towards the end of the process every single one would tack on a mandatory "service fee" of somewhere between $40-80. It seems to me to be a way to keep their room rates artificially lower to stay competitive on the price comparison websites.
(Maybe this has been a thing for a while - I haven't booked a hotel in years)
"Resort fees" are a thing but in my experience you don't see them a lot outside of what are plausibly actual resorts, i.e. typical hotel chains don't usually have them. Of course, there are always lots of taxes that get tacked on. Especially pre-pandemic, I booked lots of hotels. (AirBnB also has cleaning fees etc. although what little I've used AirBnB they seem to be pretty prominently displayed.)
On Airbnb there is one price displayed on the map (the daily rate), then when you click on a place, the fees are added and the price changes. But that still doesn't include tax and local fees which add more to the price when you go to confirm. So what you see on the map is quite less than the final price.
I believe there are laws in some locations that make Airbnb show the price upfront on the map and they do for those places. But it doesn't seem to be the norm in the US.
Vegas loves these - the last time I stayed on the strip it was $40+/day "resort amenity" fee that they did a great job of hiding throughout the booking and checkin process.
The market is SO inefficient. While you’re right in describing the principles of supply and demand, the reality is that buying a car should be 10x simpler and the price should just be the price. No games, no haggling, no BS add-ons that increase dealer profits. Retail auto is due for a wake up call, and I sense it’s happening right now. You wouldn’t need markups to make extra profit if the cost infrastructure associated with selling cars was lower than it currently is.
Tesla is leading the way today (somewhat painfully in some areas) but they're not the first to try fixing this. GM's Saturn tried to make buying simpler in the 1990s and surely there were other previous examples, too.
There's plenty of dealerships who have historically had simple purchase processes with standard no haggle pricing but often buyers have to do extensive research in order to find such dealerships.
Ford Corporate is livid with their dealers. Back in 2018 when they put out the Focus RS, dealers basically killed that car with markups. Dealers all marked them up 20-30k which put them around 70-80k OTD. While some bought it at that price, they all just languished on the lot and Ford eventually cancelled due to sluggish sales.
An almost similar thing happened to the F150 Lightning, Ford had to threaten dealers that they would withhold any future deliveries if they caught wind of markups.
From what I'm hearing from friends that work inside Ford, the dealers have burned all their bridges. Ford is sick of their crap and is working to move to direct customer sales (their electric vehicles I believe have already made steps towards this).
If Ford had really wanted the Focus RS to succeed they would have just built more cars. Dealer markups only happen on models in short supply. There just aren't many customers willing to pay even $40K for a small Ford hatchback, even though it had good performance specs.
Tesla has increased prices a lot. What’s the difference to the consumer if the increase comes from the manufacturer or a dealership? Tesla also is known for delaying vehicle deliveries if you don’t pay extra for FSD. Tesla just appears to be better than a dealership but they engage in the same shenanigans.
The market is inefficient because dealerships form a cartel, divvy up the geographical areas where they operate and don't allow any competition there. If it was an actual market, carmakers would sell off cars to dealers (e.g. at mega-auctions), who can set up wherever they want (or sell online), and all the games, haggling etc. would disappear.
And to be clear, consumers shouldn't have to negotiate for hours to try and get a "fair" price during "normal" market conditions.
The current "markup" phenomenon is the same as the prior experience (pre-pandemic) where OEMs intentionally subsidized the purchase of their vehicles well below MSRP, and savvy customers could negotiate thousands off a car deal. It's mind boggling to me that we allow for such an inefficient market to perpetuate! 100 years of franchise dealerships is enough! Time for business and consumers to wake up and enact change.
Even during normal times if you wanted a trim that was somewhat desirable you would get hit with this behavior. Plus you get so many hidden fees that don’t have to be listed like the “Toyota Advertising fee” for over 1k. A few of those different fees Added 3-5k in normal times
Conditions may be different now, with the internet at all, but the fact is this has been tried a number of times by individual dealers, and at least in one very large scale circumstance that I can recall - the now defunct Saturn division of GM. Saturn famously touted fixed, non-negotiable sales prices as a feature of their vehicles, part of the total package of the car similar to its warranty and so on.
Even with all of the might of GM behind it, and with the cars themselves having a distinct position in the market with a few unusual features no other brand had, such as polymer body panels that were lightweight, rust proof and easy to repair (by simply replacing entirely), Saturn only lasted a few years before folding.
I was selling cars myself for a few months during their peak, and recall that they mainly got used as a rhetorical backstop by customers who would bring in an invoice for our vehicle (printed out from edmunds.com, which had just barely become a thing at the time), and argued that they should pay some absurdly small fixed number ($100, $300, possibly $1000 if they were buying an NSX, our "halo" vehicle) over invoice to get a fixed price like saturn.
This was a couple years before dealerships had organically responded to the internet by adding all sorts of hidden costs that do not show up on an invoice to the base price (in addition to the usual ones) so unlike today the invoice was literally our invoice price. But they were not there to buy a Saturn they were there to buy a different brand of car.
Let me be clear; we should move away from Manufacturers SUGGESTED Retail price and go towards Manufacturers Retail Price. Just make it that the price is the price, and then the dealers can become glorified delivery centers/showrooms and service centers.
They'll make tons of gross profit because their cost infrastructure will go down, and OEMs will be happy because they still won't have to deal with customers and can focus on wholesaling cars to their "dealer" network.
The rub is in the finance and insurance products. OEMs all have captive lending arms, and currently dealers make a ton of money ($1,500+ per vehicle retailed) in finance and insurance profit. Navigating that relationship will be interesting as OEMs take on more control of the sales process.
This works fine for unfinanced products, but when financing enters the picture, it becomes a "who is the most willing to take on debt" contest. People who can't think ahead win these, the prices are driven up for everyone else, and nobody has a good time in the long term.
Health care, housing, and education -- every year you pay more and get less.
It's like Amdahl's Law for capitalism: some things are easy to optimize, other things aren't, and eventually the things that aren't easy to optimize dominate the system.
Well yeah, if you want as much money for the car as possible, then you'd do it like that. Personally when I sell stuff second-hand (which tends to be cars, computers, instruments and various accessories), I sell it to whoever is first and closest, in that order.
Right. And I don't think we should fault dealers for wanting to make as much money as possible. They're a business after all.
I usually do the same when I sell stuff second-hand because my priority is getting rid of it as fast as possible, not to make the most money. Since dealers have very limited inventories these days, they should take more time to get a better price.
Many people actually ”need” things, but always end up getting beaten by the person who has more $. It’s just constant battering of people that aren’t as well off as others. It’s often a disgusting system. The poor always suffer due to this “I’ll just hand wave to the ethics and talk about capitalism“.
Capitalism brought hundreds of millions out of abject poverty in the last thirty years. It has real consequences. The poor in the US have better living standards than half the planet and every opportunity to better except their own cultures holding them back. The left refuses to acknowledge or deal with this, creating generational poverty. What's not to blame is "capitalism".
Capital markets are really great at some things, and really bad at others. Treating them as a one-size-fits-all solution for our problems is inefficient and dogmatic. We end up coupling our moral values with the system we use to try to enforce said values
Firstly, that it is illegitimate to criticise capitalism because it has created some benefits. As if we're not even allowed to dream of system reform because we're currently doing better than other countries. Very little social or economic progress would be made if we all thought like this.
Secondly, that those benefits are purely due to unadulterated capitalism. In reality, Western countries follow a mixture of capitalist, statist, and socialist policies. The poor in the US have seen improvements because of the minimum wage, anti-trust regulations, and various social safety nets combined with economic growth.
Thirdly, that the only thing holding other countries back is "their own cultures". This ignores widespread, long-term destabilising interference by Western countries in Africa, the Middle East, South Asia and South America.
And then manufacturers will increase supply and prices will go down.
I am fairly open to the argument that price gouging for necessities in times of sudden life threatening crunch is not ok, but car market is operating like a normal market.
It's the only way for businesses to not completely collapse and still meet Agenda 2030 goals of reducing emissions worldwide. I personally think that the supply chain crises will be a boon to energy and emissions reduction worldwide. That not everyone will be able to afford a big car and such, well, they'll have to adapt.
Then the market is acting rationally and allocating limited goods to the highest bidder. Prices would go down if the population stopped purchasing at the given prices. But all it takes is one person to buy at a price just above yours to keep you out of the market.
I'm not arguing against the dynamics of the current economic system. I'm challenging whether "that's business after all" is a sound ethical defense of a decision to raise new car prices in this climate.
You could just as easily claim that industry consolidation is "rational" because it the people making the deals make a lot of money, but the overall effect is often bad for society.
And this one is not because there are enough cars in the US and even if currently no new are produced - existing are rarely decommissioned because they no longer work.
Very few people need new car now. Or need to change their car now. It is a flexible market. In the current market supply shortage means that you will have to squeeze 50000 more miles out of your current car in the next two years. It's not insulin or baby formula.
A ~30% spike in used car prices which has been ongoing for a year and is predicted to continue for 2-3 years is bad for people that need a car to commute and can't easily afford to buy another if and when theirs breaks down.
Maybe you're right and this is a fraction of a percentage of the population. I'd be surprised but am open to seeing stats on it.
That's just wrong. About 5% of cars are scrapped every year. Many people need to buy a replacement vehicle on short notice because their old car suffers a catastrophic mechanical failure, or is totalled in a collision.
I also think it is precisely within the rights of the dealership. That’s how it is supposed to work.
Similarly, I also love that this website exists as a consumer, to provide balance to the market and better distribute demand (keeping prices overall lower).
Generally, I would agree with you...let the market decide the price. But, car dealers have successfully "cornered the market" with state franchise laws. It is not a competitive market so it won't operate normally.
So much is "wrong" with the dealership model relative to a competitive market I don't even know where to start. But, I do believe over time the franchise laws and dealer cartels will change dramatically. We're seeing that start to happen now with Tesla's model and Ford is creating a new model that looks a lot like Tesla's. Some states, looking at you TX, will continue to protect the local dealers cause the dealer associations donate a lot of money to state politicians but the tide will eventually turn...at least I think it will.
American society is structured such that a car is considered more or less a requirement. Is it okay to charge the max people will possibly pay for other requirements of living like medicine? Martin Shkreli Was universally loathed for that.
Dealers aren’t supposed to charge extreme markups any more Than they are supposed to give cars away for free. They do it because right now they can, but that doesn’t make it moral or American. It is just greed, which is often waived off as “how capitalism is supposed to work”. It’s just greedy usury because they can get away with it.
That’s not what’s happening though. Dealers are artificially limiting supply to induce that sort of logic. They have massive lots of cars parked here in staging areas yet if you check their in stock inventory they quote lead times and wait lists. Surprise though, they have plenty they’re just a bunch of liars taking advantage of the situation.
The other issue is the classic bait and switch they do. They’ll market one price online but once you’re in person suddenly that price is marked up 15k.
The solution? Remove dealers from the equation and let the manufacturers sell directly.
I don't think the process of buying a new car is efficient at all. And I'm not defending the dealership system either. I'm just saying they're acting rationally, and that the markups don't shock me.
It's called an allocation strategy[0], and what you describe is the "market" one. There's also queues / lines and lotteries, for example. In a line system, there's a first come first served principle, and a lottery consists of people signalling their intent to buy, and then the buyers are selected randomly from that pool.
how about you sell it at the listed price to the first who comes in to sign the contract?
Maybe those who were too late will come back and be quicker to decide next time, because they think you are fair.
If you make it all about who has more money, they'll go to another dealer.
There's no shortage of them.
Imagine if any store did that: you go to an Apple store to buy a new iPhone, there are 20 people in front of you. Are you ready to outspend some of them?
Hypothetically, if I were your competitor and you adopted this policy, what would stop me stationing an employee with purchasing power at your door and just being the first one to buy every car as it comes into your lot, taking it home and then marking it up to the actual market rate?
why should I care?
Hypothetically that would make me rich in a very short time span and I could afford to buy and resell more expensive cars or buy at volume and make better deals.
You would be basically financing my business, at zero interest rate, while I also make a profit on the money you give me.
You do realize that profit is "the excess of returns over expenditure"? it's not given that you are making more money than me (I could easily have an higher markup), but for sure I'm having less problems than you finding customers!
your assumption is that by buying everything I got from me and selling at an higher price than me (doesn't mean higher markup) you are pushing me out of business.
Or that you are monopolizing the market buying all the cars, assuming that you can buy the tens of millions of used cars around.
You're also assuming that I am stupid and I'll let you do that, in the name of principles.
The second time I see you coming in to buy a car I'll check who you are, the third time you come you'll be greeted by a "we are not a B2B company, find another supplier".
The point is dealerships have a limited number of cars to sell, and it's unclear when the next ones will come in. If I want a car and the dealership is out, I'm fine paying a premium or financing the car through them or whatever to get priority. That's how the market moves up.
Aside from the last sentence, I agree, and a fun reminder that raising prices is a good way to mitigate against high demand / low supply.
That said, I was expecting to be countered on the inherent riskiness of my position, as I'd forgotten that it is indeed mutually beneficial but for that.
they are not overspending anyone, they are simply trading their time to be first in line, while I buy it from my comfy chair at home at the price listed on the website.
and they also need to hope there are enough stupid people on the internet to buy at a markup something sold in the hundred of millions of pieces,one indistinguishable from the other.
more proof that an honest business can serve society better than scammers.
How do you feel about ticket scalpers who use bots to buy up concert tickets, then relist them for higher prices? This is only possible because the the tickets are being sold originally for under market value.
> this is only possible because tickets can be made artificially scarce
Surely you agree there's a supply and demand curve for concert tickets, where if the price is sufficiently low, all tickets will be bought, and if the price is sufficiently high, few or no tickets will be bought?
Market value is what people are willing to spend for something. If people are willing to spend more on the tickets (the scalper's price), there's an incentive for the scalper to create bots to scoop up the tickets and resell them. That means the artist performing at the concert is leaving money on the table and letting the scalper profit off their underpricing.
The artist should increase ticket prices and cut out the middle man. Of course there are other systems the artist could use to improve the perceived fairness to fans, like linking ID to tickets, or using a lottery system, or selling tickets to anyone willing to wait in line for days. But all of these have their own pros and cons.
>Of course there are other systems the artist could use to improve the perceived fairness to fans, like linking ID to tickets, or using a lottery system, or selling tickets to anyone willing to wait in line for days. But all of these have their own pros and cons.
Which are all non-money methods of charging more. Whether it's with time or luck.
Hardly seems fair to people who work long hours to feed their family and don't have the luxury of time to constantly try to scoop up the available vehicles. Plus, the ones who do have the time will recognize the obvious, easy money to be made in re-selling vehicles they purchase.
How do you account for dealers which sell for $0 above MSRP but then include a non-negotiable $700 "paint protection" service?
As a crowdsourced site, you'll get a ton of reports that a particular dealership has no markup and few if any reports from people who have actually been far enough into the purchase process to discover these hidden markups.
Great point (I’m the Zach Shefska referenced in the article), and have been working in this space to advocate for consumers. Two things:
1) new FTC proposed rules (which are open for public comment!) would ban the practice of “surprise” add-ons at the dealership.
2) a lot of folks that contribute to markups (and other crowdsourced initiatives) go all the way to getting a buyers order and then report those add-ons when they show up then.
The FTC (or congress) should mandate this for everything. The price for something should be the final, out the door price. It's amazing to travel in the UK and buy something at the supermarket. If it says ￡1, then that's the cost at the register.
Right now in the US, there's resort fees, booking fees, regulatory compliance fees, and on and on that all get added during checkout. It's so deceptive.
Hey, cool to see you post on HN. I started following you and your dad on YouTube during the pandemic.
It's been fascinating how you've (very intentionally) built your online following. Between social media vectors, the website, forums, paid tier access, pricing tools, and now insurance, you have quite the operation.
Other folks on HN should take notes on what you've accomplished so far.
Thank you for the kind words. We have so much more work to do! Trying to innovate in this industry is TOUGH. All of the incumbent business models are predicated on information asymmetry. We're having fun changing the way things work and sliding the scale in the consumers favor.
Right now we are currently accounting for both markup and mandatory add-ons as a total in the same numerical value. If it's 0 markup but $2995 for N2 filled tires then the total markup is $2995.
We are finding the opposite to be true. Most of our posters are folks that have actually spent at least a little time dealing with a dealership and are reporting the numbers back to us. Our hope is that as we get more postings the false or innacurate postings will be drowned out by the accurate quality ones.
That's exactly what I did. I had my checkbook and was there to put in a deposit when I found out. Here's an abridged version of how the conversation went:
> Me: I don't want that and won't be paying for it.
> Them: Well we do it for all new cars and you can't have us not do it.
> Me: Well then you can either eat the cost of this unnecessary "service" or sell me the car for $700 under MSRP to make up for it.
> Them: Sorry, we can't do that.
I walked out and they haven't called me back to say they were bluffing. Meanwhile, I'm working with a different dealership now.
The advertised price has to include everything a typical buyer will end up paying.
Eg. it was found illegal to advertise a certain price which only applied if you paid with a certain quite rare credit card. (and there was a surcharge for other cards). You have to show that a good chunk of buyers end up paying the advertised price.
In the UK but have another data point - was looking to buy a demo car from a VW dealership - paid the deposit and it was a decent amount under MSRP as it had 1500 miles on it.
Phoned up the next day to say another dealer in their network had already sold it earlier in the day but not uploaded the paperwork yet.
Polite, but firm, email was sent back opining being disappointed in their customer service as the dealership was so close to work and would have loved to have a long-term relationship with them yielded - a 1250 GBP discount on ordering a new car, as specced, at MSRP.
There are good dealerships out there, but it's liking finding a diamond in the rough.
The last time I bought a (used) car from a dealership, I walked out, and they caught me as I was walking out the lobby and dropped the add-on, and then another add-on after some arguing since they knew I’d leave. That was successful.
> Meanwhile, I'm working with a different dealership now.
Hopefully that goes well for you. When I recently got a new car, I called around to all the local dealerships before I found one that would order me a car at MSRP. But I knew I wasn't done with the BS. It took seven months for the car to come in, and they didn't add any cash markups, but they did give me a money factor for the lease that was really high. I could have walked, but then I'd be waiting another seven months or so and would be paying above MSRP and probably still get a marked up money factor. I really had no leverage.
More annoying than that, though, was that when I asked them about the high money factor, the finance guy just straight up lied right to my face that they didn't mark it up. What I'd heard on the internet was wrong. What the other dealers told me was wrong. The whole world was wrong. Why? Why would he lie to me like that? It served no purpose, because I couldn't really do anything about it anyway. It's like it was compulsive with him or something.
"We don't mark it up... we just get a kickback..." (Mental gymnastics in his head are: a mark up on the rate is a percentage added... We just get a [possibly] "flat" commission kickback.)
But the point stands - if everyone walks out, and the only people driving out are those who accepted the service, they can't reasonably be considered a $0 MSRP dealer.
> But the point stands - if everyone walks out, and the only people driving out are those who accepted the service, they can't reasonably be considered a $0 MSRP dealer.
FTFA
> “The problem with the majority of other new car search sites is that they are not using crowdsourced data — they are using the data dealerships provide,” Soucie-Howren said. “We have found that the majority of dealerships do not display the true markup data or mandated add-ons.”
Sounds like your concerns are taken into account - the founders claim to take into account "mandated options" (such as it is).
Don't pretend this is a victimless crime. He was tricked into wasting his time due to false advertising, and honest dealers who advertise the full price lose customers to fraudsters.
On Saturday, my friend traded in his 2017 GMC Canyon with 86k miles on it for $19k.
He had paid $25k for it new in 2017. The dealership now has it listed for used sale for $28,995.
If they're turning a $10k profit on a 5yo car driven pretty hard for 5 years and selling it above what it cost when it was new, I have no doubt they're marking up the new ones even higher!
Yeah, the one silver lining of the crunch. When I just bought a new car, I traded in a 2011 Toyota 4Runner with 75K miles and a caved in rear hatch and some non-obvious mechanical problems. Got $15K for it. Was really shocked. Sort of made up for the fact that I pretty much paid sticker plus a couple add-ons.
TBH, the only real issue I have with this is dealers capturing all the markup - this is happening because paying those prices gets you a new car now, and not in 12mo when the supply shortage is relieved.
I'm not exactly sure how these things work, but if the manufacturer is forbidden from selling direct and dodging the dealer, that's a problem. If the manufacturer could, but is choosing not to, well, that's on them - They are simply transferring the PR hit to the dealer (and giving up the profits, which sounds dubious)
Pretty good example of trading one thing for another though! Pay up now for a car now, or wait and save your money for a car that isn't marked up. It's kind of funny seeing corporations try to apply price controls, rather than the government :)
Tesla's can only be bought new directly from Tesla. They are the manufacturer and "dealer". The sales people work on salary, no commission. Here's the list of states where you can't buy a Tesla directly but there are workarounds for those people https://en.wikipedia.org/wiki/Tesla_US_dealership_disputes
The auto manufacturers themselves lobbied for these laws ~100 years ago. Cars were very new and they wanted to encourage the construction of single-brand dealerships all over the country. They knew that local businessmen would not invest in dealerships if they could have the rug pulled out from them so they lobbied for much of the legal framework that governs franchisor-franchisee operations today.
No business wants to sell to consumers, they are irrational and a huge liability. Much better to have some poor schmuck deal with that and be universally hated.
Historical reasons why it happened are one thing but it’s worth noting that consolidation of corporate power is bad and breaking it up a little is a good thing.
It's not a supply-shortage, it's inflation. It's just that some businesses are yet to incorporate the markup into their costs. Once that's done, it'll be distributed everywhere equally.
I agree and personally it'll be good to see people reducing their consumption. The supply shortage is just a means to get us closer to meeting 2030 goals
Comments in this thread remind me why it’s so efficient to use the auto buying program from Costco. You deal with the fleet managers instead of regular sales staff and all required/optional costs are upfront and non-negotiable.
If you are an expert haggler you can likely negotiate a better price than what you get through Costco, but for the rest of us it gets you 90% of the way for very little effort.
I tried to use Costco Auto program when I bought a car in late May of this year (2022). Once the dealers heard I came from Costco Auto program, they acted disinterested even though they are part of Costco Auto program (e.g., Al Hendrickson Toyota). Plus, there is no Honda dealer that is part of Costco Auto program within 180 miles of where I live (I live in just a little north of Miami). I went to Mazda of North Miami which supposedly is part of Costco Auto Program, and guess what, they gave me $500 discount and they said that's all I get as part of Cost Auto (but the car was like $4000 above MSRP).
I hope that when I purchase my next car, I'll never have to deal with dealerships and can buy it off online. I'm happy to pay 6-10% commission for dealership as long as I don't have to deal with haggling and being pushed to buy shady insurance and other add-ons that I don't need.
When dealer's first question is how much am I willing to spend monthly rather than talk about final price of the vehicle he can just F off and I won't be returning there.
They even try to convince you the total price is irrelevant, only monthly payment is what matters
The last time we bought a car, the salesman tried the 4 square nonsense. I declined to look at monthly payments and was evasive about how much I wanted to spend. I just said, "as much as I need to, to get the car I want at a decent price, which according to my research should be X" or "my monthly budget is not your concern, I am willing to pay X for this car".
Once I had the final price on the car, and it was very comfortable to me, they STILL tried to get me to sign a 'contract' using the four-square numbers. Just monthly payment amounts, no length or other information.
They literally wouldn't move forward until I signed it. Like, wouldn't let me see the manager to finish the deal. The price was so good on this one, though, that I didn't want to just walk out.
So I took a black sharpie and crossed everything out, wrote the total price, and signed it at the bottom.
It wasn't a legal document. It was literally just a sheet with their handwriting on it saying "monthly price agreement". Nothing finance related, no legal jargon anywhere.
Ridiculous. Just absolutely ridiculous, and for what purpose?
Ha ha, yeah, I remember a green sales person trying to use the four-square model on me. I looked at him and said "I'm paying cash" which confused him to no end. He had to go see his manager. In the end I didn't buy a car from that dealer. Where the cash comes from is none of their business; i.e., loan or something else.
They got upset last time when they wanted my social right off the bay and I declined saying I would be paying cash. I’m now driving a Model Y I paid for in cash, so done with dealers.
I've contributed a few dealerships around Illinois.
Wife is looking for a Chevy Bolt after her car was scraped in an accident (the other person's fault).
Every dealership other than a single local one is charging between $5K and $10K "market adjustment".
I'm sure many of these are just charging the markup no matter what. But I have a theory many charge this if you're from out of town and won't be paying them later for maintenance services. This the local dealership that seems to be the odd one out not charging this.
> It's for the test drive so you don't run off without traceability with the car.
Doesn't the test drive come *after* you ask "How much?"?
Honestly I am surprised at the attitude that merely showing up at the dealer means that you locked into a purchase, and you can't find out the price until after halfway through the purchase.
In my country (not the US) it is normal to negotiate price before even looking at the car (for new cars, anyway).
Whatever quote they give you is then locked in, they can't change their mind when you change your address details.
Not that we don't get screwed, we do, but that's due to a different cause.
carmax has been doing this with teslas. visited a carmax lot and saw around 10 model 3s, identical specs, with less than 50 miles (the 1k miles is the lowest the site will show) and selling them for 10k markup. they’re literally scalping teslas now, not to mention the rest of their overpriced inventory.
I doubt CarMax is actually placing orders, but I wouldn’t be surprised if CarMax is the first place anyone goes to scalp their own new model 3 and CarMax is happy to add an extra 5k to profit on their sale.
Possible, but unlikely. The sales tax+registration you'd be paying would be a lot on a new car, around $4000. I believe Carmax doesn't have to pay sales tax or registration on a new car because they're a dealer.
No; the dealer license allows them to own cars without titling them in their name, not escape the sales tax / registration the state collects when a car is titled.
And that car was titled, just as every Tesla is after Tesla sells it.
Oh jeez, ya I know CarMax is bad. We dont really have a clean way of reporting teslas or scalping of resold vehicles by 3rd parties like that right now at markups.org
I wouldn't buy a Tesla from Carmax (I wouldn't buy a Tesla from anyone), but for everything else, it's pretty great. I bought my last car from them online at an extremely sane price, and they delivered it to my door; a few weeks later a better trim of the same car popped up on their site (many hours away), and I was able to exchange without any drama.
I got pretty decent at car buying from dealerships over the years, and I kind of feel like a sucker for playing that game now.
Again: I'm sure you're right that buying a Tesla from Carmax is a terrible idea.
My personal experience was that sites like carmax and vroom had significantly higher mark ups then dealerships and lots of complaints that their “360 inspection” had terrible quality control problems and frequently shipped bad cars.
I can see these sites working for very specific models and trims but overall bad.
Honestly it’s all bad unless you get lucky it feels like.
Vroom and Carvana are shit with mechanical inspections/repairs, but CarMax should be fine; unlike Vroom/Carvana their in-house mechanics operate basically identically to the service center of other dealerships. Also they actually look and drive trade-ins before making an offer.
CarMax should be a little bit more expensive because you're paying for a 30-day return policy and 90-day warranty even if they're not itemized. But like, for the Tesla linked, nearby RWD 2022 Model 3s are priced between $55-60k from other sellers. So that's 5% over the cheapest comparable listing.
> Also they actually look and drive trade-ins before making an offer.
Do they? I brought in a prospective trade-in that had a misfiring cylinder (and thus a perpetually-blinking CEL and a very rough idle) and they were still willing to give me close to the top of the Blue Book range for it.
Yeah, used cars were nosebleed expensive last October (I bought my last car used in September, and remember feeling bad about the timing, because cars had gotten so expensive that I figured I'd get a much better deal if I held out until this year --- I was wrong about that).
if ya find a decent price, go for it. The convenience is worth it. Personally I found the cars I was interested in (mostly sports cars) to be incredibly overpriced. I've heard their warranty is good too.
I bought an A6, and while I didn't get the price I'd have gotten from a dealership and running the full weeks-long car-buying process, I got so close to it that running the process seemed like an enormous waste of time and energy. But then I exchanged the car, for basically frivolous reasons, and that experience was so pleasant that it feels like one of the best deals I've ever gotten on a car.
If this downturn really deepens into a true recession (however it is defined) won't new vehicle markups go away naturally as fewer customers will be buying new cars? Isn't Markups a business that only is relevant during an inflated economy?
You'll mostly get the data during a an inflated economy, but it's still good to know which companies are screwing you over so that you can take your business to someone who didn't when the economy settles back down.
I doubt losing my business will cause anyone willing to price gouge to change their practices, but who knows what other evil things that kind of company will do to exploit you so I'll feel even better supporting a business that didn't go out of their way to take advantage of people who are struggling.
Indeed, it will flip to the opposite side of the pole. Getting the best deal under MSRP. Pre covid if you were good at searching forums and Facebook groups you might find the select dealers advertising 3-5% below invoice pricing on certain custom orders.
No, if there is no oversupply it doesn’t matter how good or bad the economy is. I think right now cars are being built at like 70% of normal rate so it would take a sharp and prolonged recession to dip below demand and also take up the excess demand that’s accumulated because of low production for the last 2-3 years
I'm not sure that Markups seems relevant only, or even chiefly, because of the state of the economy. To me, admittedly as an outsider in the UK, the US car dealership model just feels wrong and monopolistic, regardless of prevailing circumstances - an exemplar of rentier capitalism supported by robust, deep-pocketed lobbying [1].
I suspect that Markups will remain relevant for as long as the situation vis-à-vis car dealerships and how they operate persists in the US. Markups may even prove to be instrumental in successfully rallying and focusing consumer support sufficiently to overcome the status quo, and so eventually have no further reason to exist. But the word "eventually" in the previous sentence is key.
We had extremely good timing buying our new minivan last year, 100% due to pure luck with when our previous car crapped out. We used the Costco buying program, which basically let us go in knowing what we would pay with a pre negotiated price and not have to haggle, and shopped in early April. We were looking for some specific trim options and the dealer let us know that they were out of a few of them due to shortages of some chips, but they did have a whole bunch of a different trim level. We walked out happy with a new van just a few weeks before inventory levels tanked and prices started skyrocketing.
The mobile experience is so incredibly bad. Tried to add a markup to the site, brutal time trying to navigate it. Moved to a different tab and lost all my input. Image upload is capped at 5mb; which is under the average size my s10e takes by default.
At this point it's not preference. A large number of people - especially lower income and young - are mobile-only.
This sentiment has become equivalent to "is it really necessary for everyone to access this?" Buying an entire desktop computer for home use just to cover the fringe cases is now a luxury.
(Not to mention the two primary use cases are reporting and viewing prices on your phone when you are at a dealership)
The old guard like Leo are still resisting the new truth backed by stats. As of Q2, mobile represented nearly 60% of web traffic [1]. You don't need to develop sites with mobile compatibility, but it'd be foolish not to.
I don't think it's resistance, I think it's lack of exposure. I don't interact with people who don't use keyboards and monitors, I only find out about them by proactively looking at stats and user research.
Even though I know better all my products are still desktop-first then checked against mobile screen sizes. It's just the reality of how designers and engineers still work. We should probably get to a place where we have a secondary monitor that by default shows 3-4 virtual mobile devices the entire time we're working.
As I stated; S10e. Not iPhone. It looks like you just reacted rather than reading, but to answer the question in earnest: no, we don't have to make sites work perfectly on every device.
That doesn't preclude criticism, however. Might want to check out current stats for mobile browsing. I've been in web development for 20 years and the numbers continue to go up. So again; no, but you're excluding a lot of traffic, and users. And for a site relying on crowdsourced data, that seems like a poor choice.
Crowd sourcing the data is the only way to uncover the real pricing that happens behind the scenes 3 hours into a dealership trip to buy that new car once you finally sit down at the finance guys office. It happened to me and it's happening in crazy high numbers of interactions. The prices listed online or initially viewed then get bludgeoned by "the mandatory addon and adm" bat once you burned half a day at the dealership and finally sit down to "talk numbers". Utilizing OEM MSRP or posted pricing data I feel paints a more flawed picture!
Start with “I have 60 minutes to conclude this deal [90 if for some reason you need to test drive it]” and start packing up your things at the 55 minute mark.
If you spend 3 hours at a dealer after you’ve identified a single car you’re interested in, part of that is on you.
Yes, I’ve walked out twice. One dealer rescued the deal; the other lost the sale to a dealer about 20 miles away.
ive easily waited an hour just to have a trade-in valued. this is part of the deal since you wouldnt land in the finance office until your trade in is valued.
Someone else will always buy any new car. They are not nearly so likely to buy it from that specific salesperson and so that salesperson's commission is still very much at risk, even if the dealership is at zero risk of being stuck with the car.
We plan to really give it a UI and UX scrub and upgrade as soon as we have some funding. We are operating an MVP right now gathering as many data points as possible and trying to figure out which tasks need implemented first.
Have you considered trying to capture the amount of time it took to get from prospective buyer saying "Let's talk about a deal" to discovering the final price ?
Since buyer's time is valuable, and wasted negotiating time frustrating, having a friction-free non-delayed experience would surely be a valuable data-point to many -- as in "I don't want to use a dealer whose average time-to-final-price is more than 30 minutes."
It’s not just because it’s electric. In rural areas like where I grew up I’ve heard these type of high-end models, like the ones with the “King Ranch” or “Platinum” packages referred to as “Cowboy Cadillacs”. Granted, $150K sounds really high, but even before the pandemic I recall hearing about non-electric $80-$100K trucks.
Yes, but think of the F150 as an entire vertical-- it accounts for ~40% of Ford's North American sales. To say they have "lots of different trim levels" is a little too basic. There are the standard XL and XLT versions, Lariat, Platinum, Limited, Tremor, Raptor and King Ranch each with their own array of add on packages and upgrades.
F150 owners treat their trucks like gamers treat their RGB desktops. Does the watercooling and lighting package really improve performance? Not really. Do nerds still spend lots of money on them? Absolutely. Putting a lift-kit on the pickup truck that drives exclusively on paved roads is similar.
It's a big sticker but that's a luxury F0150. Making luxury stuff go to the people who are willing to pay the most seems... like the system works. It's the markups on Camrys (Camries?) and Corollas that matters more.
Is the company actually a non-profit? When I click the donate button Stripe says I'm giving to "Markups, LLC" and the IRS exempt organization search doesn't return results for orgs containing "Markups".
It's cool, but not has some usability issues (most recent update for a dealership is not always what dictates the color of the marker on the map).
Anyway, crappy dealer experiences are a huge reason why so many people purchase Teslas, and why OEMs like Volvo are creating new brands that they can sell direct.
Bought my latest vehicle just before COVID lockdown (i.e., before I had a clue that my commuting days were over) and, thus, also well before Supply Chain Meltdown. Have rued that purchase ever since on the theory of "Geez, it turned out that I really didn't need this vehicle so badly"; but, after seeing these developments and remembering that I was able to get the price down a few thousand from MSRP, I'm thinking I may have come out ahead, after all.
Unfortunately many people do not care about the total cost of the vehicle. They care about the monthly payment. As long as they pay less than 700 USD a month it’s affordable. Even if it’s stretched over a 7-8 year loan at 5% interest.
So if you want people to stop paying high prices, you need to get them to look at the total cost of the vehicle. And you need to get lenders to stop handing out loans longer than 4 years. Unfortunately they don’t have an incentive to do this because long, high interest loans are profitable.
I recently bought a used car, and while the prices are up, I didn't see any 10K markups or price gouging. It's still a much more sensible choice to buy a used car.
I scroll through the list and see that some dealers -- no, stealers -- have a markup of USD 50k, how does that even result in a sale?
I'm genuinely curious why someone looks at that final price, and then decides to go ahead with the purchase. More money than sense and no idea of what a sensible price is?
Partially related: is there a simple metric and/or a website with data on the supply of cars vs. demand? To see how long before the supply constraints ease up and which brands are most affected?
Somewhat tangential, but I'm surprised that a concise domain name like markups with an attractive TLD like org was still available. In the spirit of a non-profit, I'm wondering whether they couldn't have made do with a name that specifies their (laudable, but quite specific) niche (US-centric comparison of car dealers).
The (original) headline says "nonprofit", but this isn't mentioned in the text, which does say "take the plunge to form an LLC in November/December".
Is it actually a nonprofit? Or... what does that mean, in this case? Curious to hear more about the business structure with regard to this if anyone knows.
Isn’t the purpose of any business to minimize cost while maximizing profits. As long as there are people willing to pay the price, you can’t certainly blame the seller.
Do dealers all pay the same price for a given make/model/year regardless of volume?
If not, while I get consumers only care about markup over MSRP, it’s likely dealers are not all paying the same price wholesale.
As such, if data like this becomes the norm, likely lead to small dealers who pay more wholesale going out of business — which long-term would likely be worse for consumers; to be clear, not saying that selling the markup data wrong, but it’s likely to impact the market in ways that may ultimately be a net negative.
In theory, yes, all dealerships pay the "invoice" price for a given vehicle. But often there are other financial stipulations for each vehicle, such as "hold back" which is meant to assist the dealership floorplan interest costs (basically the carmaker pays the interest on the dealer's loan to hold the car on their dealership lot for X days, then beyond that the dealership is on their own). I don't think hold back deals are always the same for every dealer, but I have no insider information.
If you ever are negotiating for a new car purchase, you can use the leverage of the hold back in your negotiations. If you're ordering a car and will pick it up the day it arrives at the dealership, then that dealer gets to pocket the entire hold back as they'll pay basically no interest themselves. Or if you're buying a car that's been on the lot for 6 months, the dealer really wants to stop paying interest on it so may take a lower offer just to stop the financial bleeding (granted, this is rare today, cars sell fast).
My understanding is invoice price the equivalent of MSRP for dealers — and like MSRP, rarely the average price paid, which varies based on number of factors; which circles back to my prior point, the dealers who are getting the best deals from the manufacturers are going to have the most room to bring down the consumer pricing, which means the smaller dealers will likely get pushed out of the market if the “markup pricing” becomes easy to get, which long term will hurt consumers.
Lastly, I personally would never by a new vehicle unless it was for a highly specific need and impossible to find used, since they’re rarely a deal; average new car drops 20% in value the first year.
Not for nothing, and this is a cool use of technology and the internet, but was I supposed to be under the impression that car dealers aren't greedy? Greed is the central axis around which capitalist economic activity is oriented. It works very, very well. I'll take greed over feigned compassion and breadlines any day of the week.
Recently I bought a Toyota SUV for a $7000 markup. But I was able to sell my lease (which I had no idea was even possible) for $5000.
I think the point is that the recent rise of manufacturer-direct sales is better - it tends to be a much more enjoyable experience, it allows you to avoid any sort of negotiations for a price (ie. you pay the price you see on the order page), and you get to spec out your exact car configuration instead of settling for whatever's on the lot.
Now, dealership laws in many states forbid the automaker from selling their cars directly to the consumer if they already have a dealership in the state, with their only recourse being that the automaker can say "you can't mark this car above MSRP", with varying levels of success.
i got quotes online and then went to the dealership to pick up my car. no negotiation. i just didn't respond to any of the buggers that didn't give me a quote in the first email.
Greed also drives the other side of the equation... The consumers side as it pertains to getting the best deal possible! Markups.org is merely trying to use freedom of speech and press to force more transparency and competition across the dealership market segment.
I just thought the headline was a bit much. Although maybe I was thinking of the article's headline, not your headline here on HN. I want to say they were the same when I posted my comment, but I'm not sure.
> Greed is the central axis around which capitalist economic activity is oriented.
It's hyperbolic, but yeah self-interest is a pretty good approximation for behavior of all living organisms. Powerful natural forces like self-interest should be utilized to produce a good outcome, but they don't guarantee a good outcome just by being powerful. Jealousy and hate are powerful forces too.
For capitalism to work, many supporting structures are required. One is information symmetry. If you have to drive 10h and speak with a sales rep for 1h before you learn the price, you don't have a free market. Aside from this being deceitful and false advertising, it introduces economic inefficiencies in the most basic sense. All efforts that bring transparency are to be saluted.
The problem is the grossly inefficient market where vehicles have an MSRP but the actual price you can pay varies wildly.
In that sense it is no different than airline ticket fees (though not baggage fees) and similar schemes. The goal is to stop customers from doing apples-to-apples comparisons when shopping.
There's very little difference between a dealership, and a scalper. Both capture all the items in the market, then work together to inflate the value, artificially. The difference is that many places have laws preventing scalpers, and many places have laws requiring that you buy a car through a dealerships.
Dealers and scalpers provide liquidity. Sellers want the item off their hands now, buyers want something without waiting months for a seller.
Dealers link these two needs together and take a cut for the service. There is no monopoly or requirement to sell a car through a dealer. It’s just that people find the service worth the cost.
We’re talking about new cars though. There are laws in some states (see everywhere Tesla doesn’t have stores) requiring dealers to be used instead of going direct to manufacturers.
> There is no monopoly or requirement to sell a car through a dealer.
This is incorrect. It's required, by law, in most states:
> In the United States, direct manufacturer auto sales are prohibited in almost every state by franchise laws requiring that new cars be sold only by dealers.
I think a lot of the objection is that dealers don't make it clear what they're actually selling the thing for.
I've heard of plenty of cases (so yeah, anecdata) where a dealer might advertise the car at MSRP, but it's not until you get in there, and actually try to buy it that they reveal they won't actually sell it for MSRP - there's "market adjustments", and mandatory addons and other things.
Price obfuscation and outright lies are of course, unacceptable. I think the general advice for years though, has been to email dealerships asking for final price and using Costco as the benchmark for who to waste time with or not. Although, the supply demand situation may have shifted so far into seller’s favor that dealers can abandon even those standards.
I heard of one person who confirmed a price with a dealer, drove there, then suddenly Salesmanager Bob (who confirmed the price) is suddenly unavailable, and the other sales managers couldn't possibly honour that because there's all these other fees, charges, mandatory addons for it.
Their attitude is basically if you want it, and you've spent this much time already trying to buy it - what's another couple of thousand to you.
Selling used cars in the current market is one area where information asymmetry probably tends to play out in favor of sellers trading into dealers. Of course, it probably screws the ultimate buyers in a lot of cases. It's not just structural issues. There are a lot of known mechanical issues that a used car manager isn't going to notice in a 5 minute examination for a tradein.
Former owners aren’t middlemen, which is a huge difference. I’m much more ok with a brand deciding they need to raise prices as opposed to someone in the middle doing it and pocketing the difference.
The site isn't meant to "get one over" on dealerships. It's merely a tool riding on the back of capitalism and free speech to reward the lowest priced dealers, pull back the veil of sneaky bait and switch pricing models and attempt to force more competition across the industry.
