Dealer Believes MSRPs Could Become Tomorrow’s Auto-Pricing Baseline

Dealer Believes MSRPs Could Become Tomorrow’s Auto-Pricing Baseline

The U.S. auto industry has been hoping to get American consumers to respect sticker prices on new cars as the real prices on new cars for many years. The long-since-failed Saturn experiment by General Motors, for instance, began 40 years ago with a tenet of “no-haggle” pricing because the indicated price tag on Saturns was supposed to be reasonable.

Every such effort has failed miserably. American consumers by and large still look at the price indicated on the “Monroney” sticker on the new-vehicle window as the starting point for price discounts, not as anything resembling what they’ll end up paying.

But what the car business couldn’t achieve by design — because arguing about pricing was so deep-seated in American consumer culture — the industry might be able to accomplish by accident.

The unforeseen development bringing us to this moment, of course, is the two-year-long shortage of microchips that has taken a huge chunk out of global auto production and left U.S. car buyers chasing an extreme paucity of new units available on dealer lots. Instead, most new-vehicle buyers end up in the showroom or online placing orders for future vehicles.

“We’ve had inventory depending on the manufacturer, some greater than others,” Jonathan Chariff, owner of South Motors, a chain of 10 dealerships in Florida, told me. “But they may be stronger one month and then not as strong the following month. Their goal is to put out the cars with the components they have and try to get them to the end consumer.

“As a dealer, when an OEM tells you they don’t have something your customer wants, you have to adjust your inventory and your ordering. And you’ll have customers no matter what configurations you get.”

Pricing has solidified around manufacturer’s suggested retail prices (MSRPs) in another significant result of the chip shortage. Many new cars these days are sold at that price point. And reports have been mounting of dealers around the nation insisting on holding out with hot models to sell them at thousands — and sometimes tens of thousands — of dollars above the MSRP.

Automakers greatly discourage the practice because of how it can damage consumer perceptions not only of particular retailers but also of OEM brands. But because U.S. car dealers are independent business owners, their will ultimately prevails.

“We do our best to try to sell our cars at sticker,” Chariff said. “And it’s on a first-come, first-serve basis. That’s why we suggest ordering cars ahead of time — so the customer knows the car is coming in for them.”

Interestingly, Chariff believes that even though the auto-supply situation is expected to improve as the year goes on, the retail industry might not simply snap back to traditional, haggle-based pricing. The wildcard element involved in the valuation of used-car trade-ins will persist, of course, but he believes three years of new vehicles selling at or above MSRPs could get consumers accustomed for the long term that those numbers represent what they’ll actually have to pay to buy the car.

“The consumer has been accustomed to negotiate from MSRP,” Chariff said. “That’s where the industry really should be changing to: ‘That’s the price of the car.’ Meaning, the car is available at sticker, and you should go to the dealer who gives you the service and attention you require. And that very well could be what happens.”