moc1976

Great analysis Tim!

I don't think people understand how the price gouging hurts Ford OVERALL. The Mustang is a great car, and it may be a little under priced. So, Ford can adjust the MSRP with the '06. But, the Mustang is supposed to get people on the Ford lots and get them looking at their other products. When someone sees a Mustang (probably going to be the 1st thing they go look at) with a $3000 mark up, they are going to get disgusted and probably leave before looking at the other cars. I know I would. They're not only going to have a bad taste about that dealer, but Ford as well. I've said it before, and I'll say it again, Nissan saw that dealers did NOT do this when the 350Z was new. Why can't Ford do the same thing?????

I understand supply vs demand, I was a business major in college, but there is another side here as well. Its about people feeling good about their car buying experience. If people got a sense of good customer service from Ford and the dealers, maybe that would help their decreasing market share???????

ArkAngelx3

Coming from someone who is at the dealership just about 24/7, people DO NOT come in the dealership and get all bent out of shape, because they might see a markup sign on any specific vehicle. I have not seen ONE single case where someone has come in looking for cars, see the markup and leave out of anger. It just doesnt happen. Most people understand it.
The markups on these cars will not hurt Ford at all. This aint no Pontiac GTO, where all the markups were causing sales to slump. We can't keep these darn things on the lot. I wish i had more Mustangs, then i wouldnt have lost a good number of Sales, due to not having a specific car.

Horseowner

Tim,

As usual, you and I disagree. Dealer's are NOT Amway distributors who simply order the product for you and have it drop-shipped to your home. They have made an investment of TENS OF MILLIONS... sometimes HUNDREDS of millions of dollars in order to be able to sell and service your vehicle.

A typical dealer has 100+ employees, paying salaries, FICA, health insurance, etc. They have a multi-million dollar parts inventory so they can service your vehicle under warranty and beyond. They have a multi-million dollar piece of commercial property, conveniently located for your access. They have a body shop, a car rental fleet, a service facility with lifts and a million + dollar investment in test equipment, diagnostic tools, laser alignment equipment, brake equipment, etc., etc., etc.

Add to this a multi-million dollar floorplan loan to keep 100's of vehicles in inventory for your selection month after month... and they often have to take unwanted and low-demand vehicles from the manufacturer in ORDER to get high-demand vehicles for your selection... such as the Mustang GT.

Auto dealers are not like some professions who can simply buy a used desk for $150 and hang their shingle in front of any $300/month office cubicle and "be in business". The investment is enormous and the costs of being available 6 days a week for parts, service, body shop, rentals and retail selection is incalculable compared to most businesses.

The " outrageous profit" on any ONE vehicle is simply lumped together with the meager profit (or sometimes LOSS) on all other vehicles sold and together that number is subtracted from the astronomical operating costs of the dealership. On the months where there's any money left over it's divided among the owners or shareholders. Selling the 1 or 2 Mustang GT's a dealer is allocated in a month does NOT take place in a vacuum and can never be examined as an isolated experience from the dealer's point of view. It's just one of 100's of transactions and a small, small part of the big picture.

So as usual... I find your logic simplistic at best. Dealers do far, FAR more than simply "order and distribute" vehicles. That's like saying a hospital only hands out Tylenol. They MAY hand you a Tylenol, but they're prepared to do a CT scan and perform neurosurgery if it turns out to be more than just a common headache that brings you to the emergency room. It's all about the physical plant, employee costs and capital investment.

:scratch:

Steve

KansasCityTim

Horseowner....It is clear you and I will never agree on anything. Nothing you say will convince me, or numerous others on this site, that a >25% profit margin on a car is earned by the dealer. Drawing comparisons between a hospital and a car dealership is as illogical as you feel my argument to be. I would contend there is a lot more than goes into, oh let's say neurosurgery, than distributing automobiles. You are comparing two very, very different services that have nothing in common. I also highly doubt that most dealerships are in any fear going under if they can't charge 25-30% markups on Mustangs. They could not do this in the past with mustangs, and they seemed to get along just fine. This is nothing more than pure opportunism.

Having said that, dealers deserve to make money on cars. People that want to pay $500 over cost are treating the dealership as unfairly as some dealerships would treat them. Everyone has to make a buck, but making $8000 on a single car for the amount of expertise and work involved on the part of the dealer is ridiculous.

Horseowner

Tim,

You're right: you and I are going to have to agree to disagree on this.

But if you don't like the overhead costs of a hospital as a comparison... let's talk about the practice of law.

Many people find personal injury lawyers an easy target when they earn as much as 50% fee on a multi-million dollar settlement. And if that were their every day experience such criticism would be justified. But of course it's not. For every enormous settlement they receive, they have lots of other cases that settle for far, far less... and many that fail to settle at all: Cases on which they earn nada for their time.

Add to that the cost of attending law school, maintaining an office, doing pro bono work for certain clients and the "obscene profit" they earned on the one big case has to be considered in light of all the other cases for which they earned little or nothing.

So too car dealers are indeed fortunate if they have one car in their inventory where they can make an enormous profit. Some dealers receive as few as 6 Mustang GT's annually. Few receive more than 20-25 in a year. Balance those easy profits against the 100's of other vehicles sold at or near invoice and the average profit isn't that big a deal.

It's always part of a bigger picture whether it's law, auto sales or operating a hospital. To take any single legal settlement or any single automobile sale and imagining that this is normative is naive.

Believe me... Paying thousands over MSRP is aggravating to all of us on any individual car since you're only likely to buy a single new car every few years. But to a dealer who sells 3-10 vehicles every day, the oh-so-rare opportunity to make a substantial profit on one of those vehicles each month is balanced out against all the other vehicles sold near, at or below invoice just to keep the inventory moving so they can stay in business another day.

It's all about point-of-view. From a customer's point of view who's desparate for an '05 Mustang GT it seems grossly unfair. From a dealer's point of view who's having to give away gas-guzzling Excursions and Explorers every day it's a financial life-saver.

So I agree... we'll disagree but it really does depend on your point of view I guess.

Steve

Arioch

There is a fine line between a reasonable markup due to demand and gouging... I guess where that line is depends on who you talk to.

Here in the SF Bay Area, almost all the Ford dealers are asking $3-5K markups (can be negotiated down), except one, Frontier Ford, which is one of the largest in the area, and charges no markups. The problem is that without a markup, they have no GT's to sell you... the GT's are sold the moment they arrive at the dealer, often before they reach the lot. So basically you have to be extremely lucky to even find a GT to buy at this dealer, or you have to pay a markup at another dealer. Either way there is a "cost"... time & frustration or money. Take your pick.

Horseowner

Arioch,

Great point. That reminds me of an old, old joke about the guy who goes into the store and announces: "I'd like to buy a widget."

The salesman replies: "Great sir, we have widgets right over here. They're $100 apiece. Which one would you like?"

The customer responds: "$100 APIECE!?!? That's highway robbery man!! Why your competitor down the street only charges $30 for a widget!!!"

The salesman responds: "Great sir. Why don't you go down the street and buy one then?"

The customer replies: "Because they're OUT of widgets!"

The salesman smiles and says: "Ahhhhh.. Well when we're out of widgets we sell them for $10 but when they're in stock they're $100. How many would you like?"

That's the same story, isn't it?

Steve

trublustang03

While I do understand that dealerships need to make money, I still don't understand how somehow could just justify a $6,000 dollar add on adjustment. Here in NJ, one dealership had a $4,000 "Market adjustment" on GT coupes and $8,000 on the one convertible they had there. I would have been willing to pay MSRP and buy a car, being that I understand that this is a hot car, but you literally have to be a moron to even pay this much for this type of car. Never mind the fact that Ford is playing affordability for this car, but all of sudden the GT coupe becomes a $34,000 dollar car and the convertible a $42,000 car, how is that not hurting Ford?

I mean I am someone with two brothers and three sisters all with disposable income and ready to buy cars, so instead of gaining one customer that could bring in five more sales because you treated them right and did not gouge them, you much rather gouge one person and be seen as a sleezball. :scratch: ?

that's life I guess :bang:

TexasVert

Well I too have to disagree with the car dealer apologists. Sorry in advance for the length of this post.

In my experience the level of "service" provided by the sales side of a car dealer has gone down every year and at the current time most salesmen do not know enough about the car to answer any reasonable question. Their one purpose in the world is to get you to buy any car they can from that dealership at the highest price possible. This is not service. If someone is just out to get my money any way he can and has no concern whether I buy a vehicle appropriate to my needs or any other criterion other than getting the most of my money possible, then he is only barely legally above someone who steals from me. I am not talking about someone who merely collects a advanced marked price when I decide what to buy. But someone who psychologically pushes me to buy something without any care of my needs or budget and tries to get me to pay as much as possible.

The argument about the capital investiment in a car dealership is seriously flawed. Other than the tiny investment in the floor space for the cubicals for the salesmen and the lot for the cars themselves, the entire rest of the dealership pays for itself in spades!!! Far more is made in service than in car sales in most dealerships. The finance office that sells aftermarket warranties and pulls shady tricks with fiancing and leases makes more than sales does too in most dealerships.

A true supply and demand market driven pricing system sets prices for commody items by driving the price from the original source of supply down the chain. So when vegetable crops are killed in drought the price in the grocery store eventually goes up. Or when the long term cost of the inputs of production for an item goes up then the ultimate price of the item goes up.

What is happening with the Mustang is a very short term supply hiccup. This is the typical feeding ground of bottom feeding opportunists. When a toy in high demand at Christmas is in short supply Toys R Us does not raise the price above the MSRP for the toy. They simply take pre-orders and sell them as they come in at MSRP. The nasty opportunist buy as many of these as they can and then sell them in the classified for several times the price they paid.

Dealers should not ever exceed MSRP. If they do they are telling you exactly what sort of person is running the show at that dealership and I would never want to do any business with such a person.

Zc527

i saw 1 on ebay go for 15 grand over sticker...it was one of the first though

moc1976

Mike & Carlos, thank you, I think you guys actually get what I'm trying to say and bring some very good points to light as well. I have a feeling that most of the people that post here is support of mark ups are the very same ones that are trying to get those mark ups at the dealer.

OBleedingMe

Yup, or they are customers who paid a markup and are trying to justify their bad financial decision by making it seem like the markups are "reasonable." They don't want to face the fact that they screwed up.

Horseowner

Yup, or they are customers who paid a markup and are trying to justify their bad financial decision by making it seem like the markups are "reasonable." They don't want to face the fact that they screwed up.
[/b][/quote]

Sorry to bust anyone's baloon... but I'm not in the business. I'm a book publisher in the curriculum industry. And I didn't pay over MSRP... in fact I didn't even pay MSRP. I bought my '05 GT on X-plan at $2200 BELOW MSRP.... about $24,500 delivered as I recall on a sticker of $26,700.

I guess I just don't understand how anyone can begrudge a dealer from making a few extra bucks on a truly rare car. It's sort of like demanding that a coin dealer sell a 1909S VDB penny for one cent or something. Never mind the fact that they're darned rare... hard as hen's teeth to come by and darned few dealers have even ONE to sell. A rare penny is ALWAYS going to be more valuable than a common penny. Just as an '05 GT is always going to be much more rare than an '05 Explorer or F150. One is stockpiled on every dealer's lot. The other is a rarity... and bringing far more than the "suggested" retail price in almost every American market.

I don't begrudge the coin dealer selling rare pennies for more than common cents... nor do I begrudge the auto dealer selling the rare vehicle for more than the common vehicle. But that's just my perspective I guess.

Clearly the majority disagree which is fine. I've been enjoying my '05 GT for almost 3 months now at X-plan pricing while you guys argue over whether to order an '06 (or perhaps it will turn into an '07) at or below MSRP or to pay what the marketplace demands to drive one now.

I am A- thankful I paid $2200 BELOW MSRP (though I would have paid far more) and B- thankful I'm driving one of the most in-demand vehicles in 20 years!

Steve

moc1976

Sorry to bust anyone's baloon... but I'm not in the business. I'm a book publisher in the curriculum industry. And I didn't pay over MSRP... in fact I didn't even pay MSRP. I bought my '05 GT on X-plan at $2200 BELOW MSRP.... about $24,500 delivered as I recall on a sticker of $26,700.

I guess I just don't understand how anyone can begrudge a dealer from making a few extra bucks on a truly rare car. It's sort of like demanding that a coin dealer sell a 1909S VDB penny for one cent or something. Never mind the fact that they're darned rare... hard as hen's teeth to come by and darned few dealers have even ONE to sell. A rare penny is ALWAYS going to be more valuable than a common penny. Just as an '05 GT is always going to be much more rare than an '05 Explorer or F150. One is stockpiled on every dealer's lot. The other is a rarity... and bringing far more than the "suggested" retail price in almost every American market.

I don't begrudge the coin dealer selling rare pennies for more than common cents... nor do I begrudge the auto dealer selling the rare vehicle for more than the common vehicle. But that's just my perspective I guess.

Clearly the majority disagree which is fine. I've been enjoying my '05 GT for almost 3 months now at X-plan pricing while you guys argue over whether to order an '06 (or perhaps it will turn into an '07) at or below MSRP or to pay what the marketplace demands to drive one now.

I am A- thankful I paid $2200 BELOW MSRP (though I would have paid far more) and B- thankful I'm driving one of the most in-demand vehicles in 20 years!

Steve
[/b][/quote]

Ok, so now you've comparing the Mustang GT to rare pennies from the turn of the century. What the F I mean first it was dealerships and hospitals, and then pro bono law work. I mean, we're talking about a mass produced car here, not a hospital, or a lawsuit, or coins.

And don't worry, I'll be getting my '05 soon enough, so I don't have to worry about ordering an 06 or 07 and it will be at X-plan price.

I also don't begrudge dealers for this practice, read my posts, all I've said is that I don't think people realize the negative impact that this overcharging has for Ford. There is a stinker born every minute, so more power to the dealers that find people willing to pay over sticker. But in the end, I don't think the practice is good for FORD.

Horseowner

Moc,

Sadly, you're probably right. And Ford has absolutely nothing to do with the problem- nor any control over it. Dealers are independent businesses who buy vehicles and resell them. They're just as free to sell vehicles at MORE than the "suggested" retail price as they are to sell vehicles at LESS than "suggested" retail price.

If Ford has to absorb people's ire it's probably because they priced the vehicle substantially too low for market conditions. As someone had said before I think- if Ford had made the MSRP $29,995 or $32,995 for a GT instead of $24,995 dealers wouldn't be marking them up, supply and demand would even out and customers wouldn't be complaining... plus Ford would be putting a few extra dollars on their bottom line which is hurting this year once again.

Steve

Arioch

Just to be clear, I wouldn't pay a $6,000 markup either.

Talk about dealer markups...

The dealer at which I bought my Mustang (Ford of Dublin) had a silver Ford GT (the racer, not the Mustang) in the showroom. I'd never seen one in person before. The sticker was around $150,000, but the dealer was asking $350,000. Yes, a $200,000 markup.

Imatk

To me it's very simple... though I don't know if my opinion of a car is like many enthusiasts here.

I have a Mustang, a '91 I love it. I want a new Mustang and will probably get one at some point when I really want to and can afford it.

But a car is simply a means of transport. It's not an investment, it's not a "necessary" good (like hospital care or insulin to a diabetic) it's a device to get you from A to B and there are MANY MANY of these said devices out there.

Sooo when I actually go to buy a new Mustang, if I cannot find one for at least MSRP I will simply not buy one. I will either continue to drive my current Mustang which is in great shape or if I MUST get a new car for whatever reason I will... but it will NOT be a Mustang if I can't get a fair deal on one.

I'm an enthusiast and I love this car, but I'm also a realist and I'm not getting bent over for ANY car... and I would imagine A LOT of other people, especially those who aren't enthusiasts, will also not pay over for this car... so in the end yes, Ford will suffer... as will the dealerships that THINK they have people over a barrel right now. As was previously mentioned... supply and demand... if your price is jacked up... simple supply-side economics on an "unecessary" good will force others to go elsewhere.

Budette

After getting hosed for all the extra money, just what do you think the insurance company will pay you if you drive off the lot and total it? Or wonder what the wonderful car dealer will give you for the car if you take it back in the very next day to trade on a truck or SUV-bet not even MSRP! But, if your able to drive away feeling OK, then enjoy what you bought...you know the dealer enjoyed selling it to you!!

OBleedingMe

You cannot compare a collectible car (like my '67 Shelby GT500) to a MASS PRODUCED car like the '05 Mustang GT. That comparison is laughable. Two completely different economic animals.

NolanzDad

this is exactly why I'm leaning towards getting a Corvette- I qualify for the GM supplier discount,as I do for the Xplan pricing from Ford,and I found a dealer who's willing to accept the GM supplier pricing!...a savings of $6,000 off MSRP!