On Some U.S. Cars, It’s Sticker Plus : More Dealers Marking Up Popular Models, Survey Finds
These are the halcyon days that auto dealers only dreamed about three or four years ago, when the bottom seemed to have dropped out of the new-car market.
Now, with U.S. auto production straining to keep up with sales while quotas continue to restrict imports of popular Japanese cars, the law of supply and demand is working in the dealers’ favor--with a vengeance.
As too many would-be buyers chase too few of the most desired models, some car prices are going through the showroom roof. Many dealers across the country are adding special charges, increasing the price of dealer-added optional equipment and demanding higher than manufacturers’ suggested “sticker” prices for some models.
But, so far, consumers have not been complaining too loudly.
Although a few dealers were charging premiums for popular cars--particularly imports--even before the economic recovery began in 1983, the practice has become widespread recently, according to a survey of 200 dealers conducted by Ward’s Auto World, a trade publication, for its January edition.
More than half of those surveyed by the magazine acknowledged that they charge more than the sticker price for at least some popular models.
The survey also found that charging above the list price has now become nearly as common among domestic car dealers as it is among those selling scarcer imported models.
As Much as $1,500
Although the Ward’s survey did not disclose how much extra dealers are charging, a number of dealers interviewed by The Times acknowledged that the premiums vary from several hundred dollars to more than $1,500, depending on the scarcity and popularity of the model.
Selling cars above the manufacturers’ suggested prices is perfectly legal. Dealerships are independent businesses and so may charge whatever they can get for the cars that they buy from the factories, although traditionally dealers have sold cars below the sticker price.
Just as dealers may offer deep discounts when sales are slow, they may also increase prices when sales are brisk.
The Ward’s survey found that most of the dealers polled aren’t worried that the practice of selling above sticker prices may tarnish the already tattered public image of the American car dealer. While 52% of the dealers surveyed said they now charge more than the sticker price on some cars, only 1% said they believe that there is strong customer resistance to the higher prices.
In California, where the practice is thought to be most common, dealers acknowledge that the Ward’s survey findings are on the mark.
“There are a lot, especially import dealers, charging over list,” says William J. Symes, owner of Symes Cadillac in Pasadena and newly installed president of the National Automobile Dealers Assn. “We (the dealer association) are against charging over list price, because in the long run it will hurt the image of car dealers. But a lot of dealers are going to go their own way no matter what we say.”
Says Harlan McHugh, sales manager of McHugh Lincoln-Mercury in Los Gatos, near San Jose: “I think California is where (the practice of charging over list price) originated, with the imports, and now it has trickled down to us (domestic dealers).”
He adds that his dealership is now charging $1,590 above the sticker price on Lincoln-Mercury’s new German sports coupe, the Merkur, which has a base price of $16,361. “There just aren’t that many of them around, and import buyers have been programmed to pay more, anyway.”
Lionel Canerday, who owns Pontiac, Cadillac and Oldsmobile franchises in Porterville, near Bakersfield, acknowledges that he is adding extra charges to the sticker prices of some popular models.
Other Methods Also Popular
“On the Pontiac Fiero (base-model price of $8,495) my dealer markup (extra price over sticker) is $295,” Canerday says. “And on the N-cars (General Motors Corp.’s new mid-size, front-wheel-drive Oldsmobile Calais, base price $9,039, and Pontiac Grand Am, $8,149) that are equipped with V-6 engines, which are scarce, we’re also adding $295.”
He adds: “But you should see it up in Silicon Valley. Some dealers are adding $1,000 or more on hard-to-get cars.”
Not all dealers are quite as open about the higher prices, however. Some pad their profit margins by making expensive optional equipment (such as stereo radios and air conditioning) standard or by adding a charge for normally optional rustproofing treatment on all cars, then listing those costs as part of the sticker price.
Others have increased their prices for such items as floor mats, exterior trim and certain types of interior fabrics.
None of this makes auto executives in Detroit very happy, especially since manufacturers don’t share in the extra profits from sales above sticker prices. They also worry that price-padding is often blamed on the manufacturers as well as the dealers.
But auto company executives say that, because dealers are independent and generally stuck by Detroit during the bad times, they are reluctant to criticize the dealers now for trying to make an extra buck.
“We try to discourage the blatant blowing up of prices, but you can’t discourage them from getting a high price on a hot car,” says Ford Executive Vice President Philip E. Benton Jr.
Some Say Imports Worse
Still, he acknowledges that Ford is frustrated that some of its most popular models, such as the Ford Mustang convertible and the Lincoln Town Car, are commanding above sticker prices at many dealerships, especially on the West Coast.
“We don’t like to climb all over our dealers, but when it is just excess dealer profit, that smacks of a rip-off,” Benton says.
Bennett E. Bidwell, Chrysler Corp.’s executive vice president in charge of sales and marketing, tries to defend his dealers by claiming that import dealers are still far worse offenders than those handling domestic cars.
“The Honda dealers have been sticking it to the public for five years,” he complains. Honda’s cars have been such sales successes and the supply has been so limited in the United States that dealers frequently have been charging over sticker for such models as the Accord and Prelude.
But even Bidwell concedes that Chrysler dealers have joined their Honda comrades in charging above list, especially for hot models such as Chrysler’s mini-vans. “You talk to (the dealers) about it, and you tell them that you want this customer to come back for the long run,” Bidwell says. “But the problem is that you have demand chasing supply.”
Economics may soon come to the rescue of car buyers, however. Although limits on Japanese imports are expected to be continued for a fifth year, most industry officials expect the quotas to be increased by about 10% beginning in April, thus increasing the supply of many models. At the same time, domestic production capacity has been increased, which should eliminate shortages of U.S.-built cars.
Higher Inventories
In fact, the normal slowdown in mid-winter sales has finally given auto makers a chance to replenish their supplies of both imports and domestic cars. Factory and dealer inventories of unsold U.S.-built cars are now at an 11-month high, while inventories of imports are at their highest levels in 19 months, according to Automotive News, an industry trade journal.
The improved supply picture should provide greater price stability in Southern California over the next few months, says H. F. Boeckmann, owner of Galpin Motors, a Ford dealership in Sepulveda.
