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Federal Incentives: Subsidizing 'Volt-Gouging' By Chevy Dealers?

 
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2011 Chevrolet Volt test drive, Michigan, October 2010

2011 Chevrolet Volt test drive, Michigan, October 2010

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It's the sign of a successful car launch: Dealers add blatant markups to the sticker price, charging thousands of dollars extra because buyer demand exceeds supply, and dealers have the only supply.

Now it's happening to the 2011 Chevrolet Volt, the range-extended electric car that went on sale in December and has generated huge public interest.

Reports of dealer markups are caroming around Volt forums and other online venues.

Supply and demand, or 'gouging'?

New 2011 Chevrolet Volt on eBay for $4,000 over sticker price

New 2011 Chevrolet Volt on eBay for $4,000 over sticker price

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Meanwhile, at least one party in Sylmar, California, put a brand-new 2011 Chevy Volt on eBay with the MSRP (sticker price) shown as $43,700 (including options) and a Buy It Now price $4,000 higher, marked in the description as "selling price."

Whether it's a dealer or a private party is hard to tell, but the car is being sold as "brand new, never registered, available for immediate delivery," and there's a large "E-mail me for other colors" note. Which adds up to a dealer to us.

While there's no guarantee a dealer will get their markup, it's perfectly legal. State auto-dealer associations are huge political contributors, meaning that in most states, decades-old laws make it actually illegal for a carmaker to sell you a car. Instead, you must consummate the sale with an independently-owned dealer or distributor.

Direct sales by Chevy: Sorry, illegal

New 2011 Chevrolet Volt on eBay for $4,000 over sticker price

New 2011 Chevrolet Volt on eBay for $4,000 over sticker price

Enlarge Photo

Chevy and other carmakers would probably like to sell you the Volt directly--the same way you can buy an iPhone from Apple if you want, say--to keep better control over a process that all parties agree is unpleasant for buyers. Unfortunately, that's not going to happen.

Under franchise laws, dealers must execute the sale, and carmakers can only "recommend" pricing strategy. So when supply and demand get out of whack, dealers add thousands of dollars to the price.

(The "no-haggle pricing" policy of the now-shuttered Saturn brand were possible because Saturn dealers signed a very different kind of franchising contract.)

Dealers "wouldn't do it"

2011 Chevrolet Volt

2011 Chevrolet Volt

Enlarge Photo

Last July, when Volt rollout details were made public, GM executives--including the Volt's then-marketing manager, Tony DiSalle--said that while they couldn't legally prevent dealers from adding markups, "dealers wouldn't do it" because they all understood how important the launch was.

It seemed improbable then, and it has now proved to be untrue.

Your tax dollars ---> dealers' pockets?

But electric-car advocate Chelsea Sexton raises an interesting question: Should Federal tax credits for purchase of electric cars--which may soon become the more effective direct purchase rebates--be used to enrich dealers?

In a recent blog post, she suggested that the purchase rebates only be given if the car sells at or below the sticker price.

President Obama inspects the 2011 Chevrolet Volt

President Obama inspects the 2011 Chevrolet Volt

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That way, dealers could still mark up their Volts, and the earliest buyers could choose to forgo the credit and pay more immediately--or wait a while and get their rebate when supply and demand even out.

It would also neatly solve the political awkwardness of Federal subsidies of thousands of dollars going to the wealthiest early adopters, who would buy the car regardless.

What do you think? Should electric-car rebates preclude dealer markups above the MSRP?

Leave us your thoughts in the Comments section below.

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Comments (10)
  1. Very simple fix to this problem. People should just STOP buying them. Once they sit on dealer lots for a while the mysterious markups will disappear FAST.
     
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  2. Not all dealers are eager to handle the new plug-in cars. Considering that dealers appreciate additional profit, perhaps subsidizing a mark-up provides some incentive to train and equip for dealing in plug-ins. Still, it didn't seem right when a Chevy dealer asked me for $7500, the amount of the Federal credit, above MSRP. (BTW, I refused and ordered from another dealer at MSRP.)
     
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  3. GM dealers are scum - that's the bottom line. Their short-term greed hardly ever pays though it's always GM corporate who pays the price. The dealer just switches to Hyundais or Kias to stay in business.
     
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  4. Stop buying and the price will come down!!
     
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  5. je suis acheteur d,un pick-up electrique
     
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  6. Supply and demand. Let the market work. No one is forced to overpay for a Volt. It's not like there aren't other car choices. If someone is willing to pay more, let them. That will spur supply and reduce the price. Artificially fixing a price for a non-essential good is the antithesis to capitalism.
     
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  7. Stupid GM dealers. The point is, how do you know the dealer isn't a crazy glue sniffer? "Buildin' model airplanes!" says the little dealer, well, we're not buying it. He sneaks into your house once, that's all it takes. The next thing you know, there's money missing off your dresser and your daughter's knocked up, I've seen it a hundred times.
    And you know why they mark up the price? Because they know all they sold ya was a guaranteed piece of shit. That's all it is, isn't it? Hey, if you want me to take a dump in a box and mark it guaranteed, I will. I've got spare time. But for now, for your own sake, for your daughter's sake, ya might wanna think about buying a quality product from me.
    Tommy Callahan
     
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  8. I will never forget when the PT Cruiser came out and dealers marked them up $5k and people eagerly paid over msrp. We are talking about a 4cyl ugly underpowered car here. Talk about stupid people.
    A year later people were trying to sell them for more then a new one since now they were selling at msrp. Today they are the way of the typewriter.
    Americans are scammed more than any other country be it a new car, home improvements or a quick get rich pitch in buying foreclosed homes.
    In 2002 I was looking to purchase a commuter car and the Big Three refused to deal at invoice. No trade, cash off the lot. I bought my first Hyundai..since then I still have it and at 129000 miles it looks and runs like new. Along the way I did buy a used 95 vette and 06 Jeep Commander at huge savings over new.
    Consumer Reports states "buy a good used low mileage vehicle and save thousands over new." I do and always from a private party.
    Bowser Hyundai in Pgh Pa area has been fair in pricing and excellent in warranty service. Loaner cars even on recalls if parts aren't in stock.
    Watch out GM since the new Elantra is rated well over and above your conservatively designed over priced Cruze! GM Kia is coming...
    Doug S
     
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  9. Well, you ask an important question here about the markup, but miss the more important question. Why is the Volt $42,000. It is $42,000 because there is a $7,500 rebate from the government that was announced before the car price was set. If not for that, the car would be priced at $34,500. So GM is getting the $7500 not the consumer.
    For all the "free market" people in the comments, let me just say that once the government is offering $7500, the "free market" principles are out the window.
    And by all means restrict the purchase to MSRP when there is active incentives.
     
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  10. Dealers have the right to jack up the price. People do not have to go for it. You can call it the price of exclusivity. I personally would feel like a fool if a paid a stupid amount more than the neighbor down the street only to say I had it first, all the while, he strokes a much smaller monthly check because he could wait a few more months or so!! And let's not even think about what the inequity will look like!
     
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