I saw a friend of mine on the beach this morning, and he asked my wife, Nancy, and me if he should buy a used car that our dealership had for sale. At first, I said that I don’t recommend that anybody buy a used or new car today, unless they must, because prices are beginning to come down and inventory selections are rising quickly.
He asked me, nervously, why my price on this used Prius Prime (rechargeable hybrid) was higher than my price for a new Prius Prime. I told him that I have no Prius Primes in inventory and the waiting list for them is about ONE YEAR. He looked at me aghast, and I hurriedly explained why. That is, I’ve always had a policy of never charging above MSRP for a new vehicle. This was rarely an issue in the “pre-Covid” era. High demand, exceeding low supply rarely occurs in the new car business. Chevy dealers sell Corvettes way over MSRP, and Toyota dealers sold Supras way over manufacturer’s suggested retail, but this is rare.
I went on to explain that the Covid pandemic, microchip and other parts shortages, the war in Ukraine, high inflation, and high interest rates, have changed auto retailing and manufacturing into “Bizarro World”. The used Prius Prime on my used car lot was priced higher than a new Prius Prime because I have no new Prius Primes and Toyota can’t build and send me one for about a year. When I traded in the used one, I had to allow the buyer of the new Toyota a very high trade-in allowance because low supply and high demand for used car prices has soared. With my markup, the final retail asking price is higher than MSRP (my maximum price) for a new Prius Prime.
I’ve been a car dealer since 1968 owning several franchised dealerships. This is the first time that I’ve ever literally had zero new vehicles in my inventory. Every new vehicle I sell and deliver, 200-300 monthly, was ordered months ago after my customers placed their orders. This month I’ll deliver about 250 new Toyotas to customers that ordered their car up to one-year ago. The average wait is about 5 months. These cars come in daily on trucks, carrying about eight cars each, and are washed and prepped for delivery in a day or two.
Why would anyone wait up to a year for new Toyota? It’s because I’m the only Toyota dealership in the USA, as far as I know, that caps his out-the-door price at MSRP, the manufacturer’s suggested retail price. I charge no hidden fees. The only extra charges over MSRP are Florida sales tax and the license plate. All other dealers, Toyota, and every other make, are charging thousands of dollars above MSRP as well as adding hidden dealer fees on top of that!
You might be wondering why anyone would buy a new Toyota from any dealership except mine. The reasons are (1) I’m only one of about 2,000 Toyota dealerships in the USA and most people don’t know I’m selling for thousands less. (2) Most new Toyota buyers either can’t or won’t wait months to take delivery of their new vehicle. If you want something bad enough, many people (who can afford to) are willing to pay up to have the instant gratification. (3) The less educated, sophisticated buyers often are unaware of that they’ve paid thousands over MSRP.
The red flag to any car buyer of any make should be the number of new vehicles a particular dealer has in inventory, sitting unsold on his lot. The larger the inventory a new car dealer has, the higher his prices. They should have taught you in Economics 101 that sellers pricing their products too high, will have much larger inventories than those that don’t.