Reputation Management: Marking down dealership markups
Welcome to Reputation Management! In this new series, we’ll explain the oft-mystifying behavior of your local automotive industry—places like car dealers and service shops.
First, we’ll dig into publicly available customer reviews for those businesses. Then we’ll remove the names and discuss the situation from multiple viewpoints, leaning on my years of experience as a—you guessed it—reputation manager.
If we do this right, you should walk away a better, smarter consumer. Let us know what you think in the comments! —Sajeev
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We all know the cross-shopping drill when it comes to buying a new car. (If you don’t know, read about these eight steps.) The path of a vehicle from assembly line to suburban driveway is complicated, because most Original Equipment Manufacturers (OEMs) have mid-level distributors (i.e. car dealers) sprinkled across the country. While consumers are generally loathe to appreciate this arrangement, it benefits both OEM and dealer for reasons you might not have considered:
- Save face: Difficult warranty/repair/workmanship issues can be blamed on the dealership rather than the OEM (which happened regularly during the Takata airbag-recall fiasco).
- Move metal: Did the OEM make too many undesirable sedans to fulfill a contractual agreement with labor? No biggie—just cram them down the throats of the dealers. They will make people buy the four-doors over CUVs.
- Get cash now: OEMs have their own JG Wentworth, as cars that roll off their assembly lines are often pre-sold to dealers so they can “get cash now.”
- Be compliant: OEMs must make CAFE-friendly, fuel-efficient cars in our great nation. But such vehicles are generally undesirable, especially when gas prices are low. Who will buy them? It’s not like the OEM expects you to buy three Chevy Aveos in order to get that Tahoe LTZ your family wants; that’s what they expect from the dealerships.
Keep these issues in mind when you (rightfully) hate on car dealers, especially when their actions equate to outright greed. The case at hand is of a dealership and its $90,000 worth of additional dealer markup (ADM) on a new Corvette Z06.
It all started last August, when a customer posted the above on his public Facebook page (click here to read the unredacted version) about the $90,000 ADM. No surprise, the automotive internet was set ablaze. Big-name automotive news websites openly slammed the dealership.
The issue was resolved the next day. A dealership employee apologized and promised to sell all Z06s at sticker price. Apparently, the ADM the dealer was looking for wasn’t worth the impact on its online reputation.
But look a little deeper …
In 2023, that apologetic employee posted this note of recognition from Chevrolet on his personal, public Facebook page. The note suggests a dealership need not apply ADMs to make a profit or to win an award for performance. Posting that OEM recognition publicly is the textbook definition of “bad optics.”
But nobody noticed the blunder, as the next Internet firestorm ensured this Facebook page was safe from harm. Let’s get back to the $90,000 ADM, which certainly, unequivocally ensures the next buyer can’t flip the car for profit. Becoming upside-down is a valid concern for the first buyers, especially because, in this case, the customer’s Facebook account included multiple postings for desirable vehicles. Those vehicles wore booster plates from another dealership, suggesting the Z06 buyer also worked in the car business (though their connection may be tangential). Those postings bring about questions:
- Would this customer flip that Z06 to someone in his network for tens of thousands in pure profit?
- Did they earn that right to flip the car? How many slower-selling Chevy Bolts did this customer buy over the years to earn a Z06 allocation?
Hate them all you want; ADMs exist to reward the dealers who have stuck with the manufacturer through trying times. Loyalty doesn’t come for free. I shudder to think how many CAFE-compliant cars this particular dealership has taken off Chevy’s books in the past 50 years.
Of course, there’s that whole free-market economy angle, to which some of us are fiercely loyal. But at some price point, an ADM becomes a slap in the face of a majority of customers, hence why this particular dealership still reaps what it sowed.
Facebook, where art thou?
The dealership’s digital media team still doesn’t have the will to reinstate customer reviews on its Facebook page. (I am sure last August was a hot mess, so staffers shut down reviews/comments for the sake of their sanity.) But while Facebook reviews can be toggled on/off with the click of a button, there’s no such luxury for reviews on Google and Yelp.
That said, I’m sure both platforms instituted social activism protocols, because almost all traces of the $90,000 debacle are no longer present. But we got lucky, as it were: Some reviews remain published on Google. Let’s have a look.
Social activism unleashed!
The lack of any unique information or timing in this review is suspect; any Internet warrior who reads a car blog coulda written this. The odds are low that its author has any interest in buying a vehicle, but one can click on their name to see their other reviews if so inclined. In theory, this review could be flagged by the Reputation Manager; Google woulda removed it nine months ago.
The same thing applies here. On the plus side, the dealership has a 4.5-star rating on Google with almost 4000 reviews, so the remaining bad reviews have not made a big impact on local Googlers who have no interest in a Z06 and are just looking for a Chevrolet dealership in their area to sell them a more mundane vehicle.
But that’s a good point…
This review reminds us of the dichotomy between a Chevrolet dealership and the intended buyer of a mid-engine Corvette. Tens of thousands of ADM are possible on lower-volume brands like Ferrari and Lamborghini. While Ferrari skirts the issue by having a global list of preferred customers, would anyone tank the ratings of their dealers for wanting 90 grand over an SF90 Stradale?
This review only supports the argument that Corvettes should be sold in a more premium dealership environment.
A silver lining elsewhere?
Let’s be clear on one thing: I come not to bury this dealership. I only wish to let a story unfold from multiple vantage points, as the actions of car dealerships are rarely as one-sided as many suggest.
This reviewer catches my drift: He gives the store’s general manager a dash of praise for “being upfront” with him. When a deal like this (presumably not a Z06) has been so badly torched, that one sentence is a wonderful tribute to an employee looking to make things right. Which begs the question, is it possible to mark up a Z06 in a good way?
Altruism: The Ultimate ADM
What if a dealership can make a ton of money for a charity in lieu of exorbitant profits?
That’s precisely what happened at a competing Chevrolet dealer when they put one of their Z06s up for auction and generated $71,000 for multiple local charities. That’s still a lot of markup over sticker price, but the “entire $71,000 will be donated.” The end result is a vehicle that won’t be “lost” to a flipper and, even better, earns something tangible for the dealership.
The public is generally kind to a dealership throwing cash to beneficial use. Goodwill marketing is valuable, so why not donate to a worthy cause? Doing so nets sales referrals from locals interested in the rest of your dealership’s lineup. The more metal you move, the happier a manufacturer is.
I’ve seen the charitable angle work many times, and I firmly believe that’s how a dealer plays the long game. In fact, let me coin a phrase here: altruistic ADM.
Marketing isn’t cheap, but pissing it away on even more obnoxious TV, radio, or 
siren emoji ALL CAPS screaming Facebook ads isn’t necessarily a great use of the cash generated by ADM. Dealerships chase good money after bad on a regular basis, so altruistic ADM can instead be a better move.
While this wasn’t directly connected to ADM profits, I was proud to play a (very small) part in the video above. (I can only hope my former employer is keeping this program in effect.) Dealerships using their resources to help the local communities that support them is beyond worthwhile. In this case, the dealership is working with a local school district to honor a “Teacher of the Month” with a new car for that time period. Once the month is over, however, the teacher must return the vehicle, because no dealership could stomach the cost of giving away new vehicles on a monthly basis … no matter how worthy their recipients may be.
Pulling a car out of the fleet and throwing the keys to a new teacher every month isn’t free, but the gesture is worth more to that teacher and her circle of influence than any TV or Facebook advertising campaign the dealer could use to target them. Perform enough altruistic ADM, and the circles of influence start overlapping in ways that few but Elon Musk understand.
Most dealerships have not realized the benefits of this strategy, however, and the decades of shady dealings never go away. If the world was a different place, perhaps that electrified automotive brand with no dealer network coulda had a harder time penetrating its market. That’s precisely where we are going in our next installment of Reputation Management.
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What did you think of Reputation Management? Was this a good use of your valuable time? Would you like to see more—and if so, anything you’d change or add?
We’re always open to suggestions from the Hagerty Community, and if there’s a type of business you want to discuss, odds are we can find it online. Tell us what you think in the comments!
Sajeev; yes, this article was “a good use of my valuable time”.
It serves to reinforce my already jaded opinion towards dealers, and why I never have, and never will, buy a new vehicle.
Dante could add a Tenth Circle for car dealers.
Carmine,
I am glad to have you reading my work, as per always. 🙂 That said, maybe we are lucky someone buys them new so we can get them used. Well not me, I love buying new cars, especially when I just help people navigate it all…that way I get all the enjoyment with none of the hit to my bank account.
LOL… Dante’s 10th circle… Good one..
I am a new buyer and I keep up on the games that many dealers play. I am that customer that comes in prepared and they hate when I catch them at a lie.
The dealers were good for the MFGs years ago but in this day and age the auto makers could easily go to a system to where they sell on line and build your car in a week most times.
The fact is GM has too many dealers and the government watches over and protect them. In the Corvette they can limit allocations if needed but they are even limited there.
The real issue is this Dealers know the public has a short uninformed memory and they will take advantage of this. In cases like the Z06 people get that I have to have it now or first and pay the price.
If we all just sat back and let the dealers bleed they would not do this.
Pre covid I generally got $7K to 8K off most vehicles I bought. The last one they tried to rip me on trade and I gave them a resale quote from Car Fax that they had signed me up to for free. When they told me my trade was not worth that much I gave them the document they gave me with Car Fax. I got the price up $7K more.
I went to walk 3 times before I got my price. Then I hit them with $2K more GM card money off. I usually would have walked but the vehicle was the one my wife wanted and supplies were dropping at that time.
The dealer ship is a broken experience and it needs to change. The laws need to reflect that but the lobbies are very strong so it may be a while.
It used to be easy to find a decent sale rep but anymore that is becoming rare. It is tough selling cars today and it is leading to many of the better people finding other jobs.
Even my last car was used from a dealer and I walked away for a week before we came to a deal. You just have to learn to ice the emotions and not let them or the dealer control you.
yup
“I usually would have walked but the vehicle was the one my wife wanted and supplies were dropping at that time.” – The ultimate bargaining chip is the ability to walk away … unless your emotions (or your wife’s wishes) get in the way.
As for ADMs – an acquaintance managed to enter the Taylor Swift lottery and got 2 tickets for $200 apiece. Someone else found out and offered him $1,650 each a few hours later. He sold them. Any touring musical act sells out within minutes and the fans end up paying the scalpers many times the face value. Scalping adds no value to the ticket just as an ADM adds no value to the car.
This is profiteering plain and simple.
Not too surprising in the social and political climate we’re experiencing now.
Your last sentence makes me think you are either young or naive or both. Scalpers and dealer markups have been around for decades.
I don’t know who Taylor Swift is, but when we sat out all night at the Capitol Theater box office (Passaic NJ) in December 1979, waiting to buy Allman Brothers tickets in the AM, the bunch of guys behind us were all working for a local scalper.
I have not purchased a new car above sticker. So far every car including my new Lexus IS 500 I got this February were below sticker. I will not do adm from anyone. No car is worth it.
I signed up for a 2023 Cadillac Lyriq the first day they started taking orders. The dealership said they refused to take the reso without me signing for 5k over MSRP That car was never made. My order was “transferred” to a 2024 with an MSRP of 15k more. If and when it finally gets made I’m refusing to pay over MSRP because it’s not the car I originally signed for. We will see how that turns out.
I would contact other dealerships using their online form, I bet a dealer in a nearby city will sell you one for sticker. Or in another state, because shipping will be less than that level of markup.
But if someone buys the Vette for sticker price and flips to make $50,000 that’s ok?
It’s not okay, but they wouldn’t be able to do it twice. They would only get the offer to buy the Vette if they were a known customer and the dealership would know if you flipped it. I imagine GM could flag them too. So the purchaser of the Vette has burned their reputation.
Once is enough when you sell cars, either on the side or for a living. That’s one heckuva commission for one person.
And the market always decides. If someone is foolish enough to pay through the nose then it will always be this way. The factory can’t dictate what a customer does after the purchase. They can void warranties, etc but that’s a slippery legal slope they usually don’t want to deal with. I was a small FCA dealer who sold a few Hellcats and a Demon and they were all at sticker and luckily none of my customers tried to flip them. You just need to find the right dealer.
That’s fantastic to hear, as I see so many folks looking to flip them in my part of the country.
Greetings Sajeev, this is a great article, plenty of helpful information. Please do write more on the subject.
I’ve gotten to despise some of our local dealerships, unfortunately.
Thank you Art, I think you will enjoy next month’s piece.
Great article and as you aptly wrote, looking at things from “multiple vantage points” tends to give a more nuanced understanding. Look forward to future installments.
I am glad that resonated with you, as that’s crucial to me!
My dealer (Safford CDJR) failed me big time. I ordered a 22 Dodge Charger Hellcat Redeye-Jailbreak and was supposed to get it at Sticker since it was a sold order with NO ADM. After 3 cancellations from FCA/Stellantis (no fault of my own) my order was converted to a 2023 “Last Call” order and those rotten bastards tried to finesse me for 30-40k ADM on a car I ordered a year ago. I can’t stand these disgusting dealers and I don’t give a rat’s azz about their going out of business sell since they’re going to be losing a lot of business since nobody wants a EV muscle car lol. I instead got smart and bought a 21 Redeye used from a millionaire who took impeccable care of it and even came with 2 sets of new tires and PPE/ceramic coat already done for literally HALF the price. I couldn’t be happier. If the dealers don’t honor their word then why bother. I still get my car serviced there but they lost out on any future sells from me. Don’t ever pay ADM, and if you do don’t go over 5-10k. Folks are literally paying double what these cars are worth and it’s pathetic!
I’m the guy who everyone brings with them to buy a new car. Has to be a cash transaction and if they have a trade, I tell them they could practically give their trade to a stranger and come out ahead. Sell it yourself. I studied under my Father who would often leave the dealership with a new car while leaving the salesman shirtless. It’s even easier now because we are armed with internet pricing and competitors’ offers on like vehicles. While my favorite deal was pre-internet, it was quite satisfying. I was in the market for a new C4 Corvette, yeah that was a big thing at one time, and you couldn’t beg, borrow or steal to get one. Some dealers were asking a $50,000 ADM on a car that stickered for $26,600 loaded. That’s a lot of money in 1984 dollars. From the 1982 models to the 1984s, sticker was up about $6,000 to $8,000. That’s quite a jump and the median age of new Corvette ownership went from the early thirties to early forties. Anyway, my friend found a dealer about 2.5 hours from my home that had a couple of cars in stock, some purchased from other dealers. I found my preferred red/red, loaded coupe and it had an ADM of $14,995 on top of the $26,600. As the salesman approached me he was telling me how rare a new 1984 C4 Corvette was but I knew full well they would build as many as the market would bear. As he got closer, I held my right palm down, made a circular gesture with my index finger and told him that if he thought he was going to get an extra $14,995 out of me, he could turn around and go the other way. I also asked him, “Do you know what is more rare than a new Corvette ?” Answer: “Someone who can afford one.” I guess he took it to heart as it became clear that if he didn’t make a deal then and there, he would never see me again. In the end, my thirty year old self drove the 2.5 hours home in my brand new Corvette purchased at sticker. I paid cash but I’m not rich, just a Teamster concrete mixer driver who doesn’t buy on credit but waits until he has the cash in hand. It was an okay deal but don’t shed any tears for the dealer, there was plenty of profit built into the sticker price.
We all live by the same profit/loss motives of consumerism. Any store/dealer or person eants to buy low, sell high. Car makers are required to set a MSRP for the benefit of the consumer. And since makers maintain their Dealership network, the idea is to set a price they can both profit nicely from. Price gouging may not be illegal, but it is unethical, even in a Free Market Capitalist society. Ethics and morals are a voluntary virtue, not mandated by Law. Sleaze Happens.
All you can do is challenge it, or try to avoid it. If that means finding and buying from another dealer, even if they’re located in another State, then that’s what you need to do if you want to avoid getting swindled.
Them’s the facts.
I don’t like shady, sleazy Dealerships, but they continue to exist because makers disregard virtue in favor if cold hard cash.
Shame on them.
GM knows all this, they’re just walking a tightrope, trying to please the customers they’re serving, while serving several masters as well…Gov regulators, CEO, and stockholders.
Good PR is key Sales, confidence & success.
Let the Buyer beware, and the Seller dare.
Nobody is forcing anyone to buy or sell at ADM… or forcing makers to make a surplus of vehicles to keep prices within reach of every consumer. You don’t have to like it, and there’s nothing wrong with calling out sleazy, unethical, immoral and blatant greed. Some would even say its the American way.
All I know is its better than the alternative, where everyone is guaranteed a car… but its the same car everybody else has, and the makers are forced to restrict profits to keep prices affordable to the consumers.
Otherwise we’d all be driving cheap, “austere” cookie-cutter cars, griping about how boring they are… and how great it used to be.
“I don’t like shady, sleazy Dealerships, but they continue to exist because makers disregard virtue in favor if cold hard cash.”
Dealers buy the cars that people don’t want, but have to be made. That is either for market fluctuation reasons or for compliance with CAFE regulations. This has been going on for decades now, and it never fails. I am sure this is happening right now with every Ford rep pushing their dealerships to buy all the Mustang Mach E-s that you folks aren’t buying.
I doubt the Mach-E will sell in the same numbers it used to, and the dealers are the folks that have to eat this market correction.
And if they weren’t here to eat the market correction, well, look at how pissed off Tesla owners are right now after seeing the steep decline in sticker prices for the Model S and X: https://nypost.com/2023/01/30/tesla-price-cuts-anger-owners-who-bought-before-discounts-report/
I’m 67 and have bought 16 new cars in my life. Every one for under sticker. More than once I’ve walked out on a dealership that wouldn’t go to a reasonable number I had in mind, and found another who agreed to that number. I currently own 6 cars. Three Corvettes. My 2000 was 2k under list plus GM rewards dollars, my 2015 was well equipped and 8k under list. With ADM’s I probably wouldn’t own a C8 but I do thanks to winning one from the NCM raffle. No I wasn’t interested in flipping it even though my 93k MSRP car was being flipped for up to 120k at the time.
A raffle is the only way this retiree will ever be able to own a C8 in his lifetime. Right now, I’m waiting for the organizers of the Pittsburgh Grand Prix to call me this Friday and tell me that I’ve won the black-on-black Z06 in their raffle. I won’t flip it; I’ll happily pay the taxes then I’ll drive it for a once-in-a-lifetime experience until I leave this earth, then give it to my daughter. Don’t wake me from my dream, please.
The video of the teacher getting the new BMW is confusing. One point they say pull the keys to a new car every month, and the teacher says she gets to drive it for a month. Does she get to keep the car or not?
Sorry for the confusion, yes, the teacher only gets the car for a month. Let me try to fix the article to make it clearer.
More to the point: the dealership group does this on a monthly basis for a new teacher every month. One new car every month for a different teacher. When the month is over the car is returned to the dealership and it becomes a loaner car, a company car, a used car, etc.
That is a whole lot of verbal jiu jitsu to try and save face for dealers. The only reason dealers exist is because of bad legislation from the government (as always). There is absolutely no reason to have middlemen to buy vehicles from. Everyone should be able to buy direct from the OEM at the MSRP or lower if the OEM decides they want to run a sale. It is fine to have OEM showrooms and service centers throughout the country that people can go to and check out cars, test drive, etc. To limit the OEMs making cars that no one really wants, they should make maybe 4 standard offerings: truck, small car, larger car, SUV, that are produced at a constant rate that would be available at those showrooms that people could buy on the spot if they want/need it right now. Any other vehicle should be ordered from the OEM direct and the buyer will just have to be fine with waiting while it is being built for them. That way you don’t have to worry about deal markups or flippers since anyone that wants a car will be able to get it. Limiting the cars is what causes the obnoxious flipping. It is the same situation as getting a sandwich from the deli section in the grocery store. If you just have to have it right then, you can buy a premade sandwich right off the shelf, pay for it and stuff your face. If you want a different/better sandwich, you have to wait a little longer for the deli person to slice up the meat and add the toppings for you and pay a higher price. Cuts out all the ill conceived supply and all the manufactured demand. That is the only way the market will truly decide what the market wants.
If someone wants to overpay for something/anything, that’s their business. I wouldn’t do it and it appears most commenters here wouldn’t either. I have a friend who has bought 2 c8s including z06 and paid sticker for both. Not all dealers take advantage of the impatient. The lesson is simple, do your homework, know the value of what you want, if necessary, wait. Eventually you get what you want and have money for other things. Can we now address dealerships that pay the service writer a commission to sell un needed services? This is the real crime at dealerships, not ADM. people who pay ADM agree to their screwing…
No dealerships and that isn’t an issue.
Bought my 911 Turbo (used) from the dealer w/ a CPO – looking to trade across to a GT and this is what I discovered from several dealers:
“I would recommend trading out of your Turbo as soon as possible if you are concerned about value loss. Covid heavily inflated Turbo values well above what they should’ve been. As I mentioned, we just sold a 2014 911 Turbo S with less miles than your Turbo cabrio for $120k. The Turbo S is a better car in every aspect and ours was a coupe which are much easier to sell.
Turbo’s are equivalent to S-Class Mercedes and 7 Series BMW’s. They’re luxurious and over valued when knew. This causes them to tank in value. GT cars are the opposite. Any GT line 911 will hold its value substantially better than any Turbo. No matter the spec. Your car will continue to depreciate heavily. Better to bite the bullet sooner rather than later.”
Didn’t know Porsche would devalue so rapidly.