2007GT500

No offense taken.

On trade-in/blue-book, I think you have the cause/effect relationship backwards. Trade in/book value is sometimes EXPRESSED as a % of original MSRP. But, the book value reflects the market value...kelly blue book surveys actual trade-in and sales and publishes that information. Book value is a function of the market, not the other way around.

In leasing, the residual value is a guess as to the future market value. It is shown as a % of MSRP, but that doesn't change the fact that it's a guess of market value that is actually separate from MSRP. But, when you lease a new model that is very different from anything that came before it, then I believe the "guess" is influenced by MSRP (...it's more influenced by past experience with similar vehicles). Otherwise, the residual value of a 2007 Mustang is simply a function of the ACTUAL residual achieved on prior year Mustangs. Again, the actual market value is the cause...the residual value is the effect.

In any event, the value is not pulled out of their *****...as it would be if they based it on MSRP and then made "adjustments." Rather, the value is simply a reflection of what the actual market is willing to pay for the vehicle. And any 'book' is simply a compilation of that information.

And I stand by the statement that the cost of the vehicle does not generate the MSRP. There is a relationship...but it's very indirect and it's the result of the fact that the auto business is extraordinarily competitive.

My posts usually run too long, so I'll try (probably unsuccessfuly) to keep it short by analogy: If you produce widgets at a cost of $10 (including your cost of capital...debt and equity) and sell them for $20, everyone else sees you are making a $10 profit. So they enter the market and produce widgets...their cost is $10 and they sell them for $19 to take your market share. Then others enter the market and do the same. Then you drop your price. The cycle goes on until everyone is selling their widgets for $10...and there is no economic profit remaining (...which isn't to say their isn't profit they way most think about it...but the remaining profit is, in essence, the charge demanded by the suppliers of capital).

In a mature market (such as automobiles), when a product comes to market, it will be priced fairly close to the cost of production because you're already in a competitive environment. A "special" car (something like the GT500 as opposed to a Camry) will provide the manufacturer with more pricing "power"...and the margin will be thicker because of it. In this case, most of that extra profit goes to dealers in the form of ADM. This extra profit will diminish as demand for the vehicle is satisfied and will be further diminished when other manufacturers produce similar special cars (...think Challenger and Camaro). Then the pressure to price near the cost of production will be that much greater.

Given my career choices, I've spent a lot of time making pricing decisions...and I can tell you that the cost of production has NEVER directly influenced the final price. The cost of production influences the "Go/No-go" decision...but the revenue side of that picture is ALWAYS based on what the market will bear...not a percentage mark up above cost (or some other random method).

And we will sell below cost if that's what it takes to move the product once it is produced. If that happens, it means we misjudged the market when we made the Go/No-go decision or we screwed up our cost estimates.

Hollywood_North GT

I stand by what I said. "Costs" form the baseline when calculating prices, to which all the other things YOU'RE referencing are then added, i.e. market influences, competition, advertising expenses, etc, etc. But "costs" are always the common denominator.

Terrorbl T

What about the economy as a "whole"? Since the announcement confirming??? 500hp? The market has been on a downward spiral - 1 step forward, 3 steps back. Then there's gas (which should've been listed first) which like the electric shortage we had back in 2000 IS going to contribute to the mark up of goods (because they have to get THERE) which causes decrease in spending.... Next is interest rates and the "overinflation" of housing costs. Lastly a buddy of mine who hasn't been in an accident in over 10 years rear ended a woman last month who "just stopped on the freeway". Best of all, the insurance agent SAID "were in a cycle where the economy is bad, people don't have money, and we're seeing an increase in accidents so people can profit from them".
Not to throw a wrench into this thread because a lot of good points have been made but just to look at the bigger picture....
My little opinion is maybe the people who could toss 60-70k into GT500 four months ago, well??????
My target is under 45k. One year, two years(may up it a little then) - that's what I'm holding out for.

T

drmustang

I don't know what formula or crystal ball Ford uses to set retail prices. I do know that they were off the mark on the previous SVT Mustang. $6,00-$7,000 discounts were needed to move a huge number of the new Terminators

Terrorbl T

I think we can thank Ebay. -psuedo instant gratification/gotta have it now, or in this case a voucher to purchase.
Still it IS the first run so you have to expect demand to exceed supply.
I'm with everyone who believes the novelty will wear off after 18 months - look at the Ram SRT 10. 6 months into 2006 you could still get one under MSRP. What were they going for when they came out? Not to say it IS the same as a Shelby, just that when it was new.....

97svtgoin05gt

ADM is a total waste of money. You may as well light your cash on fire. Same outcome.

ADM =

Sonic Boom NH

I agree with that, those kind of numbers will basically mean quite a few people own a cool car but not worth much more then any other car of the same age 20, 40, or 60 years from now.

Shelby HAD a name when he actually made limit production of vehicles. Limited production generally means less then 500 – 1,000 units.

14,000 – 25,000 units is HUGE.

Look at any of today’s collectable vehicles and then research how many were actually produced and how many are actually still around. You would be very lucky to get close to $50,000 30 years from now for a 2007 Shelby. It’s just a name and names do NOT make something collectable nor worth tens of thousands of dollars in the future.

What makes something collectable and worth tens of thousands of dollars are exclusivity, rarity and limited production. 14,000 – 25,000 is NOT in any way exclusivity or rarity…

Interesting articles:

Article 1

Quote:

�Shelby produced just 521 street cars and a scant 34 R-model competition GT 350s in 1965.�

Article 2

Quote:

�Between 1965 and 1970 approximately 13,900 Shelby Mustangs were produced�

Ford plans on at LEAST 14,000 minimum for the first year of production and I bet they will go 3 years with production so wait and buy a cool car but do NOT kid yourself into thinking it will be worth much more then any other Mustang 20 – 60 years from now…

Tony Alonso

Shelby still has a name, otherwise some people would not be paying the ADMs on the current car.

The projected production for 2007 is 9000 units, according to the estimates floating around Mustang websites. Assuming a 2 year run at that level, the total would be in the ballpark of the 1965-70 totals.