When ‘Suggested Retail Price’ No Longer Applies

What sells? Luxury and fun.

That’s the message from the latest iSee Cars survey. But it’s also an indicator of which models dealers can expect automakers to release, even as the inventory shortage begins to ease. And industry insiders say the influx of luxury and “fun” cars may signal OEMs’ changing attitudes toward dealers.

“What are the manufacturers doing? They’re dropping their base models,” Karl Brauer, iSeeCars-executive analyst, tells Wards. “If they can only build 100 cars in the next month…are they going to build the low-priced base models that get them 9% profit, or the high-priced top-line, loaded-to-the-gills vehicles that they make 38% profit on?”

As we reported, Cox Automotive economists recently lowered their full-year forecast from 14.4 million units to 13.7 million. They also forecast sales will finish 9% lower than 2021, the weakest in a decade.

Yet the iSeeCars study shows that high-end cars — the ones Brauer mentioned rake in higher profits for OEMs and dealers —still command premium prices, jacked to almost 25% over sticker price for a popular model such as the Jeep Wrangler SUV.

The only non-luxury or “fun” car (think the Mini 2-door hardtop) in iSeeCar’s list of the top 15 cars selling above MSRP is the Ford Maverick, which comes in at No.14, just above the Genesis GV80.

The Maverick, a compact pickup truck introduced for the 2022 model year and available with either a hybrid or traditional internal-combustion-engine powertrain, sells for an average of 18.4% over MSRP, says iSeeCars.

Brauer notes the Maverick is “fairly utilitarian” and certainly not a luxury car, but he adds it’s a good value and a “complete hit that has sold out since it hit the market….I would argue that an extreme value argument should be made there.”

Dealers price all new cars on their lots an average of 10% above MSRP, according to iSeeCars’ analysis of 1.9 million new car listings.

“Dealers have responded to market conditions by pricing cars above MSRP, making a higher profit on specific models to help offset lower sales volumes from restricted new-car production,” says Brauer. “In today’s market, consumers are willing to pay well above sticker price for new cars because inventory is so scarce and because they know that new-car pricing is not expected to improve until 2023 at the earliest.” (improve how? Become more affordable?)

John F. Possumato, an attorney and founder/CEO of DriveItAway, recently wrote in Wards that dealers who boost prices above MSRP are on dangerous ground. Not only can the exorbitant prices sour customers, but the practice might nudge automakers toward actions such as employing the direct-to-consumer sales model currently in place at Tesla and other non-legacy manufacturers.

“Yes, state franchise laws and dealer lobbying groups are powerful on a national, regional and local level, but so is consumer sentiment for change,” writes Possumato. “If that were not the case, not only would taxis still be a protected industry, but Tesla’s market valuation probably wouldn’t be well above Toyota, GM, Ford and Stellantis combined.”

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