Two of America’s biggest carmakers have a message for their dealers: Stop ripping off customers.
Ford and General Motors are warning money-hungry dealers to stop exploiting supply issues — and shortages — by charging more than the sticker price for vehicles.
Automakers don’t set prices for their cars. Instead, they offer a “manufacturer’s suggested retail price,” or MSRP.
While that’s understood in the industry to reflect the fair value of a new car or truck, dealers are free to ignore the MSRP if they so choose, setting prices at higher levels.
Ford’s chief executive, Jim Farley, warned dealers that they could be pushed to the rear of the line for delivery of new models if they persist in playing fast and loose with the MSRP.
“We have very good knowledge of who they are,” Farley told financial analysts while unveiling the company’s latest quarterly results.
Ford estimates that about 10% of the company’s nearly 3,000 dealers are charging above the sticker price — a practice that grew more widespread during the pandemic.
GM, meanwhile, told its dealers that it will clamp down on “a small minority of bad actors” hitting customers with prices “far in excess” of what’s on the sticker. It too said deliveries of new models could be withheld if things didn’t change.
COVID-related supply shortages, including for the microchips that are now commonplace in new vehicles, have created a seller’s market. With demand outstripping supply, some dealers have embraced this as an opportunity to pad their pockets after months of pandemic setbacks.
This often manifests in the form of added fees and dubious warranty-protection contracts.
Edmunds.com, the car-information site, estimates that 82% of new-vehicle purchases in January were at prices topping the MSRP. In many cases, this raised the sticker price by more than $700.
“Consumers who are planning on making a vehicle purchase in 2022 must prepare for a much different market and car-shopping experience compared to years past,” said Ivan Drury, Edmunds’ senior manager of insights. “Competition for new vehicles will be fierce as inventory shortages persist.”
My advice: Don’t be shy about walking away from a bad deal. If one dealer is ignoring the MSRP, go check another. If you experience sticker shock there as well, put your car buying on hold.
Industry analysts say the chip shortage probably will persist this year, continuing to disrupt the vehicle supply chain. But these conditions won’t last.
In the meantime, don’t get taken to the cleaners when you visit a car lot.