Higher used Mach-E prices are the "New Normal"

[DennisD]

I agree 100%. Dealers are getting very few cars for stock now. Most vehicles are customer factory orders. So if they get a car that's in high demand, there are people willing to pay more to not have to wait 6-8 months or longer to get a vehicle. Most dealers are selling 30-40% less vehicles now too because of the shortages. So I would assume that makes up for some of the money they're losing by selling less units. But if you factory order a car, the price should be what you agreed upon at time of order.

I agree with all points and I would like to add my 2 cents as well.

The Dealership owners are doing quite well in the current market. The markup on new cars are thousands of dollars compared to a few hundred before the pandemic. (and that is when they sell for MSRP!!!) It is the sales people that are losing out currently. Fewer car sales = fewer commissions. The owners are still making profits from the service department along with new car sales with the way they are price gouging with the ADM's IMO.

I don't feel one bit sorry for the dealerships but rather the "small" guy both selling and buying these expensive cars that are marked up greatly on the lots.

The Dealership's raped the Gov't. through the help of the PPP program and now they are raping the consumer with the ADM's all while the sales staff along with consumers are hurting. I have a nephew that sells cars and he knows firsthand that the dealership i.e owner, that he is working for is far better off now than they ever were.

So in conclusion, good deals can still be had if you are patient. Just know that when/if you pay ADM, you are most likely padding the pocket of the owner with a little more cash and they are grinning all the way to the bank knowing that there are "suckers" out there for the pickings.

They will continue this as long as they can.

Panic = Profits

Sponsored

 

[mkhuffman]

Agree - MSRP is fair but ever since the pandemic, new car prices have seen a significant ADM.

I can't find an ICE vehicle for my business and my wife looking at Mach E is not happy with $20K over MSRP quotes.

I just filed a complaint to my state's AG for an investigation as this may constitute price gouging which CA does not allow during the pandemic.

If we are talking about remedies for shortages and high prices, requesting the government to implement price controls will not solve either one. Whenever government interferes with the free market by setting a maximum price that is lower than what the market is willing to pay, it will cause shortages.

In our current environment when we already have shortages, government prices controls will make them much, much worse. If you cannot find an ICE car now, it will be even harder if your government it forcing dealers to sell them for less than the market clearing price. It will be like pouring gas on an open flame to try to put it out. The opposite will occur.

 

[Chainspell]

Right now you can get the better of the options rate in effect when you ordered or when your car arrives. May still be that way when your car arrives.

I was thinking more along the lines of what I’ll get back for my Premium, but that is nice to know too. I did confirm price protection with my dealer when I ordered the GTPE.

 

[DennisD]

If we are talking about remedies for shortages and high prices, requesting the government to implement price controls will not solve either one. Whenever government interferes with the free market by setting a maximum price that is lower than what the market is willing to pay, it will cause shortages.

In our current environment when we already have shortages, government prices controls will make them much, much worse. If you cannot find an ICE car now, it will be even harder if your government it forcing dealers to sell them for less than the market clearing price. It will be like pouring gas on an open flame to try to put it out. The opposite will occur.

The dealerships will be making more money by selling more cars than fewer cars no matter what the price is (MSRP compared to ADM).

Once again if the dealerships can gouge the consumer and get by with it, they will. History has shown that repeatedly with large corporations. With production low, their price goes up. If the price goes down, their "art of selling cars" in many instances will go up to keep their margins consistent. They actually have incentive to sell MORE cars if the price is deflated.

Ford Motor Company doesn't like this practice with the Dealerships as well. They stand to lose more money as the Dealerships raise their prices. I would guess that in this unique instance, the Corporations may not have an issue with price protections.

If I am understanding your logic correctly, you are suggesting that dealership's won't have an incentive to sell more cars if they have to adhere to MSRP and they along with the manufacturer will make/sell fewer cars? That sounds like the argument for holding taxes down. In theory, it sounds reasonable but in reality, the company usually thrives in any event. Trust me, if the company can make MORE money to sell MORE cars, they will my friend.

There are many dealerships that sell for MSRP now and some that sell with ADM. I think everyone can agree that the dealerships that sell 10K over MSRP are price gouging. The few dealerships that do that should be held accountable IMO. That is why they call it "Consumer Price Protection". You are suggesting that we hold to "Corporate/Dealership Vacation Protection". ?

Bottom line is that some dealerships see that they may have the only car in the area and they jack up the price. Others, on the other hand keep their prices at MSRP no matter what. At the end of the day, they both would like to sell more cars.

Please explain your logic that there will be fewer cars for enforcing price protection on dealership lots?

 

[mkhuffman]

Please explain your logic that there will be fewer cars for enforcing price protection on dealership lots?

It is basic economics: supply and demand. As the price decreases for a product, demand increases. The reason you see MMEs sitting on lots is because of ADM. If the dealers marked all their cars below MRSP, lets say 10% below, they would have an empty car lot. It doesn't get any simpler than that.

So if the government forces car dealers to sell them for less than what people are willing to pay, more people will buy and there will be shortages. Well, since we already have shortages, the shortages will be worse. And the person who really needs a car and is willing to pay $10k ADM won't be able to find anything to buy.

Except for one thing: people (like some who have posted here) will buy the cars at the government mandated price and then put them on Autotrader for $10k more. Would you rather buy a used MME from a private seller for $10k more, or from a dealer for $10k more? Maybe you don't care, but all the government did was move the problem. Prices have not gone down. They have just made the market less efficient by adding new transactions that would never have existed, adding cost to the person who really needs the car.

It really is just basic economics. Price fixing hurts people. Fixing the price too high will cause the market to be flooded. Setting the price too low will cause shortages. It is best to let the free market find the price that people are willing to pay. If a dealer sets the price too high, nobody will buy the car. If they set it too low, they will make less money per car.

If the government sets the price, the government cannot know what people are willing to pay and will cause shortages or surpluses. Always. Guaranteed. That is bad, my friend. Very bad. It hurts people.

 

[DennisD]

It is basic economics: supply and demand. As the price decreases for a product, demand increases. The reason you see MMEs sitting on lots is because of ADM. If the dealers marked all their cars below MRSP, lets say 10% below, they would have an empty car lot. It doesn't get any simpler than that.

So if the government forces car dealers to sell them for less than what people are willing to pay, more people will buy and there will be shortages. Well, since we already have shortages, the shortages will be worse. And the person who really needs a car and is willing to pay $10k ADM won't be able to find anything to buy.

Except for one thing: people (like some who have posted here) will buy the cars at the government mandated price and then put them on Autotrader for $10k more. Would you rather buy a used MME from a private seller for $10k more, or from a dealer for $10k more? Maybe you don't care, but all the government did was move the problem. Prices have not gone down. They have just made the market less efficient by adding new transactions that would never have existed, adding cost to the person who really needs the car.

It really is just basic economics. Price fixing hurts people. Fixing the price too high will cause the market to be flooded. Setting the price too low will cause shortages. It is best to let the free market find the price that people are willing to pay. If a dealer sets the price too high, nobody will buy the car. If they set it too low, they will make less money per car.

If the government sets the price, the government cannot know what people are willing to pay and will cause shortages or surpluses. Always. Guaranteed. That is bad, my friend. Very bad. It hurts people.

I have no idea of why you think there would be more of a shortage. The main reason of the shortage is because of lack of parts i.e. chips. Price (in this case) has nothing to do with a shortage.

Once again, some dealerships are still selling for MSRP while other dealerships are taking advantage of the chip shortage and making huge profits on every car sold.

Ford Motor Company would not be included in the "price fixing" but rather the dealerships. We are not suggesting that "Ford" cut their prices to go broke? We would basically be asking the dealerships to sell for what Ford suggested (Manufacture Suggested Retail Price) Note that Ford did not suggest to sell 10K over MSRP. It is the Dealerships taking advantage of the conditions on the ground so to speak.

Let me give you an example that may illustrate this better.

Let us pretend you are in a desert and need water. There is a person that has a container of water that they purchased originally for $1 and they usually sell it for $1.50 (suggested price of manufacturer is $2 in this example). They now see you and decide to sell it for 100k. If you don't buy it, you will thirst to death. You decide to buy it.

Now let us say that someone i.e. (the big bad govt) decides to make the person selling the water to sell it for $2. (the MSRP price) The person is still making money even though they don't have as much water as they used to have. In this example, there would be other people out there selling water for $2 without being forced to.

The water didn't go into a "shortage mode" because he now charged $2 and the man still made 2x what he originally paid for it.

Now you come along and worry that the man that is making 100k is going to sell out of water and then inflation will occur?

The irony of this whole thing is that the dealerships are aggravating the inflation for the consumer and the dominos start to fall even faster. If costs go up, then (the consumer that bought an elevated cost product) would need to charge more for their product to recoup their loss.

Once again, please explain how there would be more of a shortage?

 

[J5hort]

The EV space and companies like Carvana and Vroom brought a new retail practice. Dealers may go the way of travel agencies once the masses are more comfortable purchasing online. Hotels.com and Expedia disrupted that industry. Ford is responding with the Model E retail model and was quite clear to dealers that markups were hurting the brand. Gouging consumers is a short term benefit, and consumers will find a way to work around. Not all dealers are gouging, but the ones that are make it bad for all. So far as used cars and EVs, they are all seeing higher values. This will probably be the case for the forseeable future as supply, demand and other economic factors are in play.

 

[Jfold]

Last week I put down payment on a dealer ordered Mach E Select AWD with the comfort tech package, 19' wheels, and interior protection in Star White with X plan pricing. What will be my Mach E is built, awaiting shipment, and was somehow not affected by the park assist issue.
Meanwhile the dealer had a used 21 AWD Select with 4500 miles and without the comfort tech package, standard wheels, and no interior protection in Space white for 2k less than the one I am buying, not to mention the loss of tax credit and X-plan pricing. I did take the used one out for a spin this afternoon. While I did love it, I will love the new one awaiting shipment even more!

 

[ridgebackpilot]

Price gouging by applying ADM is an unscrupulous business practice, plain and simple. It's a violation of business ethics and illegal in many jurisdictions, especially for essential commodities such as food.

While it's tempting to argue that that the law of supply and demand justifies ADM, the truth is somewhat more nuanced. Clearly, the Ford Motor Company frowns on the practice because they know dealers add zero value to a new Ford. There's talk that Ford may withhold deliveries of the new Lightnings to dealers that are likely to apply ADM. To Ford, ADM represents a reputational business risk. This helps explain why Tesla has done away with dealers entirely and offer their cars to everyone online for the same price.

Many large-volume Ford dealerships refuse to apply ADM because they take the long view and don't want to chase away customers. Here's an example:

Last week I spoke with the sales managers at The Ford Store Morgan Hill, where I purchased my 2022 MME Platinum at MSRP. They fully understand that they may be leaving money on the table by not applying ADM. But their view is that ADM is at best a short-sighted business practice that they regard as "penny-wise and pound-foolish". The Ford Store is the largest volume single Ford dealer in northern California, so they make their money primarily on a high sales volume. They're not about to sacrifice their business model in favor of a few high-priced deals.

Like many of you, I'm willing to go out of my way to find a dealer that doesn't apply ADM. And those that charge ADM will never get any of my business.

 

[ShelJW]

I would walk away from any deal over MSRP. If everyone would do this then they would quit trying to do it. They are charging Markups only because people are willing to pay it. A item is only worth what someone is willing to pay for it.

Wait... you said "they are charging Markups only because people are willing to pay it"... then you say "A item is only worth what someone is willing to pay for it"...

Doesn't that mean that the Mach E is worth the price with the markup???

 

[4sallypat]

Why don't dealers just hold a public auction and see what high price sells - at least that's more honest than jacking up MSRP.

 

[mkhuffman]

I have no idea of why you think there would be more of a shortage.

It looks like maybe you didn't read my previous post? The law of supply and demand is a law, not a suggestion. And just like the law of gravity, you can't ignore it when you don't like the outcome.

While it's tempting to argue that that the law of supply and demand justifies ADM, the truth is somewhat more nuanced.

The truth is demand increases when you lower the price, and demand decreases when you raise the price.

It may be too difficult to teach a course on economics via a car forum, but it is common sense, right? If Ford cut the price all the MME models by half, would demand for the car increase or decrease? Obviously demand would increase because more people can afford the car at the lower price, right?

So by forcing car dealerships to sell at a price that is lower than people are willing to pay you create more demand. If there is more demand and supply is limited, which it certainly is, you create shortages.

 

[ridgebackpilot]

The truth is demand increases when you lower the price, and demand decreases when you raise the price.

It may be too difficult to teach a course on economics via a car forum, but it is common sense, right? If Ford cut the price all the MME models by half, would demand for the car increase or decrease? Obviously demand would increase because more people can afford the car at the lower price, right?

So by forcing car dealerships to sell at a price that is lower than people are willing to pay you create more demand. If there is more demand and supply is limited, which it certainly is, you create shortages.

Your economics lesson sounds right and may well be relevant to changes in MSRP, but not to dealer markup. Your point explains Teslas recent price increases, but not Ford dealers applying ADM to the Mach-E.

The reason we (and Ford) dislike ADM is that it adds no value at all to the cars. And it costs Ford by souring buyers on their brand. So by any economic theory Ford is right to discourage dealers from applying ADM to new models in great demand.

 

[Extortion]

Been debating selling my '21 RWD Premium Extended Battery with Infinite Blue for awhile. Could make a good profit indeed especially since I have a limited color. Hmm

 

[mkhuffman]

Your economics lesson sounds right and may well be relevant to changes in MSRP, but not to dealer markup. Your point explains Teslas recent price increases, but not Ford dealers applying ADM to the Mach-E.

The reason we (and Ford) dislike ADM is that it adds no value at all to the cars. And it costs Ford by souring buyers on their brand. So by any economic theory Ford is right to discourage dealers from applying ADM to new models in great demand.

My post was about the impacts of a government mandated price from an economics perspective. I did not provide an opinion regarding whether or not it is a good business decision to add ADM.

When dealers add ADM, they are changing the market price of an item. It does not matter whether or not Ford changes the MSRP or a dealer uses ADM, the selling price in the market has been increased.

You have full proof that when dealers increase the price of a car by adding ADM it decreases demand. Many posting here have said they will not buy a car that is priced higher than MSRP. So for the dealers who have added ADM, the demand for their cars has decreased because some people refuse to go to that dealer. Right? If the dealer removes ADM, their will sell their cars faster because more people are willing to pay MSRP than to pay MSRP+ADM. Right?

So because some dealers are adding ADM, there are cars available for people to buy - as long as they are willing to pay more, of course. But at least the car with ADM is available to buy. The car would not be available if the dealer removed the ADM. And if government forced them to do it, it would decrease the number of cars available, increasing the shortage problem.

Again, I am not making a subjective point about whether or not ADM is a good business practice. I am making a factual point that if we ask the government to put price controls on the dealers, it will make the shortage problem worse. That is a fact and not opinion.

Sponsored