Recently GM, Ford, Kia and Hyundai/Genesis have been very public with condemnations of dealers who are pricing vehicles at higher than usual prices, despite unprecedented market conditions. Dealerships are facing a 40-year low in inventories and consumer demands are resulting in an increase in the average price paid by consumers. Edmunds reports that 82% of new car buyers are now paying above “suggested” retail price in January compared with 3% in January 2021.
While the average transaction price is up 15% compared with January a year ago, the demand for vehicles is high and consumers are buying more SUVs and pickups with added expensive features. The dealer response is simple:
- Market prices drove up used-vehicle prices by 41% so new vehicle buyers with a trade-in paid $305 less in 2021 than in 2020.
- Manufacturers added to their profits since low inventory levels resulted in almost no incentives and incentive spending per unit fell 40% compared to 2020.
- Price increases by the EV direct sellers has impacted buyers as well
FADA responded to Ford, GM, Hyundai/Genesis and KIA by reminding them that for 10-years or more industry competition and reductions in dealer margins left dealers with little to no gross margins from sales.
- Dealers must be permitted to price vehicles commensurate with the market economy when demand outstrips supply
- Automakers require a dealers fixed expenses to rise when they demand new facilities, tools and training
- The lack of incentives impacts dealers’ pricing – with these expense reductions for automakers we have not seen reductions in the wholesale pricing of vehicles charged to dealers
- Threats regarding vehicle allocations and withholding of incentives will violate Florida franchise laws