Toyota Service Department Mechanic Explains Latest Car Dealership Scams

I’m in the business and these “ransoms” some dealers are adding to the factory MSRP’s is brutal. A good article that points out how lopsided the math will really be at trade-in time for the customers.

So let me get this straight. Dealerships are paying 10% to 20% more than they were last year (for everything, including trade-ins) but they should also only charge MSRP? I'm guessing someone missed their Economic class. Dealership costs have not decreased this year, they have actually increased. Inflation, or better yet Stagflation is the driving force in the car industry right now. A large dealership can have a few hundred employees. They were paying those employees by selling Volume. Cars were sold at or below MSRP. A large dealership could sell 500 plus units in a month at or below MSRP and make a tidy profit and run their operations. Now there are very few, if any, new cars on lots. Just to run operations and cover increased costs (Electricity, Gas, Cleaning Supplies for Sanitizing, Wages, Shipping, Parts etc), dealerships had to raise prices over MSRP on average by around 10%.

Since trade-ins are also getting record value (around 10%), there isn't much of an increase to the consumer in monthly payments. The "Car Care Nut" seems to think that a dealership can go from selling 400 to 500 cars a month all the way down to 100 to 200 and continue operating as if it's business as usual. They simply cannot. As with most companies, they are in arse saving mode right now. Using his logic, restaurants should charge the same for an entree, even though there are less tables available for seating (social distancing rules that many states are still enforcing), increased wages to entice and keep servers and cooks and insane food costs. Does it suck? Yep. Is it wrong for them do raise prices in order to save themselves? Not at all.

We are seeing inflation in every aspect of our daily lives. Want bacon? How about paying 30% more this year than last? Buying a house? I'm fairly certain everyone knows how a short supply and high demand is driving that market. It's no different in the car business. Why should a dealership that is already under stress with low volume, sell a car at MSRP, when there are dozens (if not hundreds) willing to pay more for the same car? The market is dictating prices.

Why should a dealership give record money for trade-ins and then turn around and not recoup that money when selling a new car? Does it suck? Absolutely! Is it simply our current reality right now? 100%. Four months ago it was not uncommon to find a 2019 or 2020 used car with 10-20k miles on them selling for what a new car's MSRP was. People were paying that price, simply because they didn't want to wait for 2 months for a new car. New car prices were adjusted accordingly.

The car Market is a lot like the stock market right now. Around June of this year, prices being paid for trade-ins was insane. Prices being charged for new cars was equally insane. Prices came back down to earth somewhat and then hurricane Ida wiped out a quarter million cars. That couple with car manufacturers cutting supply once again two months ago caused prices to steadily increase.

The "Care Care Nut" may think he is giving good advice, but it's not realistic. Shopping for a good deal on a used car is going to end with someone buying a very unreliable car. If it seems too good to be true in this market, run! Why would a reputable dealership make a great deal on a used car for someone right now? I would be extremely wary if they were making a too good to be true offer.

New car "deals" are simply not there either. Dealerships aren't giving TrueCar or Costco pricing anymore. There are not amazing rebates or interest rates. If a car sales person tells you a price over the phone or internet, it's a near certainty that they are talking you into the dealership and will inform you of an Adjusted Market Value (of around 10%).

If you want the best advice, be prepared to wait 2 years for the supply chain to sort itself out and Drive your current car. We live in a instant gratification society and that's a huge reason people trade out of 3 and 4 year old cars. The car you are driving is most likely able to make to year 5, 6 and 7. If you absolutely need a new car, make sure you are trading in a used car. Fight for your trade dollars and remember that you get a tax savings when trading in a car. Shop interest rates with banks and credit unions before you go. THAT'S the best way to buy a car right now. A person may think they are getting a "good" deal on a new car, but once they leave finance they end up paying the same, if not more, than the person paying a higher price. It literally happens every day at dealerships.

If you can only afford a pre-owned car, scale back expectations. If you have caviar taste and you are on a McDonald's budget, stick with the Happy Meal and don't over extend yourself. The worst thing that can happen with buying a pre-owned car right now is ending up way upside down in a few years. Wait for 2 or 3 years, drive the car for it's utility purpose for getting you from point A to point B and skip all the frills that raise a car's price.

The other thing people say is that they are going to wait for a few months. There is zero chance the supply chain is going to sort itself out in a few months. There is no way to predict how long it's going to take, but logically it's going to be a long time, not a few months. The news focuses on the larger suppy chain issues like ships sitting off of coasts, but the supply chain is so complex it's going to take a long time to sort out. A Shortage of Truck Driver's of 80,000 isn't getting fixed in a year. A Shortage of every material to make parts for cars isn't getting fixed quickly either. Those smaller suppy chains are just as complex if not more so than the larger chains. None of this is getting fixed quickly.

So buy a car if you need a car and shop around at dealerships. If you can wait a few years, wait. But if you decide to buy, go in having real expectations and expect to pay over MSRP at most dealerships for new cars and expect to pay a premium for used cars. It simple Supply and Demand at play.

This shameful tactic is followed by toyota dealerships here in dallas. I have been to like 4 toyota dealers and all of them either refused to sell me at msrp+10% because ask for more or say that they do not have vehicles to sell or for pre-order!