Market adjustments to MSRP are a staple of your business – albeit today in a very different way than traditionally. Sale prices are a function of supply and demand. Traditionally, that forces you to adjust prices downward, less than MSRP, but that’s not the case today. Vehicles are now often sold for more than MSRP. This rare pricing climate triggers concerns that typically don’t exist.
Advertising. While you don’t need to advertise your market adjustment amount, you can’t advertise that you will sell the vehicle for MSRP if in fact you will be adding a market adjustment component. The advertised price should be the price that you will sell the car for including any market adjustment and any pre-delivery service fees (excluding only tax, tag, title and registration charges). This applies not just to your website and the local newspaper, but also to third party platforms through which you advertise new cars. Also, if you use an addendum sticker and carry over the MSRP from the Monroney label, and you show a market adjustment amount with a new total price, then you have created an advertisement that is subject to the above requirement.
Gap Coverage. Gap coverage has limits. Many gap contracts provide a coverage limitation of 25% of the vehicle’s value. While preowned pricing is currently strong, you can’t presume this will continue indefinitely. The prevalent thinking is that in 2023, when inventory levels have predominantly returned, preowned pricing will correct itself. When that happens, where will that leave a gap contract holder that purchases an Escalade today at $20,000 over MSRP? Will the gap contract actually cover the full extent of the gap or will your customer be left to absorb some deficiency and look to you for answers? Is this gap limitation being sufficiently explained to the customer?
None of the above are obstacles to your enjoyment of this unprecedented economic climate. Instead, they simply require a little attention and common sense.