David Long and the All Things Used Cars community tackled a question many would avoid: Do new car markups negatively affect brand loyalty? The room was respectful but unafraid to share divergent points of view on the touchy topic. We captured the three main frames shared during the chat.
Point: "No, markups are not hurting brands."
Data shows that customers have adapted to the inventory shortage. They are shopping for the right vehicle, not the right price. Longer waits, higher prices, and looking further away to find the car they want are just part of the game now.
Dealers can communicate the market demand and let the customer know that they are trying to help them win by offering competitive prices in their local market. Brands will not be hurt, but emboldened by the transparency. If a dealer's markup is less than half of the markup at every other dealership in town, they need to communicate that.
Customers want and deserve a competitive price compared to the market. Sometimes that price is above MSRP. Fair isn't about the markup; it's about the market.
Counterpoint: "Yes, markups are hurting brands."
Markups today will force customers to ask themselves, "What is the dealer going to do when I come back for service or need a new part?"
Dealers have to consider the long term. Sure customers will drive further to get what they want, but they will be annoyed, which will last a long time. Placing a customer in negative equity with a markup today may lead to them coming back to you for trade-in in a few years and you being unable to work with them.
Being committed to the customer winning now will lead to a lifelong mutually beneficial relationship.
Solution: "One size just does not fit all."
Dealers have to be aware of the needs in the store and in the community. At MSRP, a store with ten sales a month may not meet the needs of its team.
There is a specific difference between markup and price gouging. Customers can tell when they are being respected and are typically respectful in return no matter what the sticker says.
No two dealerships are the same, no two customers are the same, no two cars are the same, and no two markets are the same.
Ultimately a dealer can look at all the data in the world. Only a history of face-to-face time with the community can guide decision making to what is fair, honest, and honorable, both to the people who look to dealers for their vehicle needs and those who look to dealerships for their livelihood.