C8 dealer markups stink, but you’d hate the alternative more
Let’s start with some housekeeping: I’ve been at Hagerty almost a year now. Things are going pretty well; there are a lot more of you readers than there were in 2018, and we have some big news coming up for April that will get even more people involved. Here’s a hint: A few of our most loyal readers are going to find themselves driving some Instagram-worthy cars in 2020.
I’m going to start using this column to answer questions from our readers. Send them to email@example.com with the subject line “Ask Jack.” I’ll respond on any topic that won’t get me immediately fired. For example, I’m going to start with an email we just received from a fellow named Larry, and it goes something like this:
You’ve been publishing lots of blog stories about the new 2020 Corvette and its $59,950 MSRP, but how about some follow-up stories with the same intensity regarding the dealers’ anticipated greed factor and GM’s complicity (limited production, exorbitant options mark-up, dealer markup coaching, low dealer margins, etc.). I’m in line for a pre-order (only 10 allotted per allowed/approved Chevy dealer), but I suspect that when, or if, the time comes for an actual order build/payment, the dealer will bend us over. And should we refuse their usury markups (rumors of 25–45 percent abound), will they simply move onto the next person in line until their demand is met? What, if anything, will GM do to protect its consumers? Have any dealers or GM publicly addressed this issue? Or is it just going to be another dog-eat-dog GM/dealer fiasco for the consumer we’ve come to expect?
I ordered a custom 1976 Corvette back in the day (yes I’m an old man of 70 and may sound cynical) for $8095 that included a 0.05 dealer markup in an easy no-hassle process. Sure wishing to own another before death on limited means…
Larry, you’ve got a hell of a point. GM should be very careful about how dealers sell the C8. You don’t need to be 70 years old to remember a couple of cars that were strangled in the womb by greedy dealers—I’m thinking about that Australian-made Pontiac GTO and the Ford Focus RS. In both cases, the dealers thought they’d struck gold and they were asking for the moon. In both cases, the customers heard about the markups and they stayed home. And in both cases, the car improved significantly in the second year, meaning that the same dealers that were putting $20,000 Additional Dealer Markup stickers on their inventory were now forced to sell their showroom boat anchors for invoice or less. Meanwhile, you had a lot of angry customers who had decided to purchase something else. The end result: Both the GTO and Focus RS wandered off into the mists of history, good cars sabotaged by dealer greed.
Given a chance, dealers will mark anything up—hell, they were putting ADM stickers on the PT Cruiser when it hit the lots. The automakers aren’t stupid. They know that this is bad for customer satisfaction. They’re also a little envious; it is massively frustrating to develop a passion-project car like the Focus RS, knowing that it might not even break even on the balance sheets, only to see a megadealer clear 10 grand of pure profit just for doing a little paperwork.
In a perfect world, Chevrolet would be able to lay down some hard-and-fast rules about C8 deliveries. In this world, there are about 40 different state dealer associations which have managed to beat the automakers in court over and over again on that and many other subjects. Trust me on this, the people who made your car absolutely despise the people who sold it to you. There’s a reason Tesla is fighting so hard to keep privately-owned dealers out of the equation. For the manufacturers, the dealer body is like having a crackhead relative. They will lie, cheat, and steal every chance they get—and they’ll use your name to do it.
Save your emails; I know there are ethical, admirable dealers out there. I worked for one of them, Bob Keim of Bob Keim Ford in Clintonville, Ohio. Mr. Keim was a World War II bomber crewman, and he didn’t tolerate anything that even looked iffy. I’ve also worked for Ford Credit and BMW Financial during my career, and I’ve seen dealers put $10,000 of markup on a $10,495 1992 Escort LX because the fellow signing the papers was suffering from senile dementia. (I sent that deal back and was rewarded with a call from the dealer’s general counsel, reminding me of my place in the food chain.)
The bottom line is that the dealers are free to mark up the cars. Chevrolet can’t really stop them, and if they tried they’d probably be sued by dealer groups with a combined net worth exceeding that of General Motors itself. (I’m serious about that. The top 10 dealer groups in the USA combined are worth about as much as GM.)
“Alright, smarty pants, if Chevrolet can’t control its dealers, how does Ferrari control its dealers?” The answer is simple: selling Ferraris is a massively profitable business and Ferraris are in extremely short supply, so the men from Maranello can call the shots just by mumbling vaguely about next year’s allocation number. GM can’t play the same game. Many GM dealers break even or lose money on new-car sales; they actually hold the franchise for the service and parts business, which is massively profitable. GM is in the unfortunate position of needing its dealers to take, and sell, every car it can make.
This doesn’t mean that Chevy dealer reps aren’t out there doing things like tying C8 allocation to Blazer sales or whatnot, but it does mean that in the long run there isn’t that much hardball they can play. GM needs its dealers a lot more than they need it. And those dealers won’t stand for a Ferrari-style relationship. Nor will they allow Chevrolet to follow the Ford GT model, which is fine because the C8 is not meant to be a limited-production car. It will eventually be easy to buy. There’s just a bit of a crunch involved if you want to be the first buyer on your block.
Which brings us to the matter at hand, finally: There will not be enough C8s to go around. Most dealers will handle this by simply following Larry’s worst-case scenario; they will go through their deposit lists and offer each buyer a chance to pay over sticker. If the buyer refuses, they will refund the deposit and move down the list.
Is there another way? Sure there is. The dealer could choose to sell at retail. Some dealers will; I just met up with a Chevy sales manager in Ohio who is selling his allocations at MSRP. Many will not.
Is there another way besides markup or good-guy MSRP sales? Well, the Chevy dealers could do what the Ferrari dealers do and make you expand your relationship with them. It’s well known that the only way to get in line for a new high-demand Ferrari is to buy a used car or a boat anchor like the old non-turbo California from the dealer of your choice. If you do that a few times, you can get on the list. But you might still face a markup.
Imagine having to buy a Blazer or a four-cylinder Silverado from your Chevy dealer in order to get on the list for a C8. Wouldn’t you just rather slip the guy 20 grand and not take up that space in your driveway? Sure you would. And that’s what a lot of people are going to do.
There’s one strategy I haven’t mentioned: the dealers could just give the cars to the people who deserve them. Many of the Corvette owners with whom I’ve spoken feel that they fall into this category. They’ve been loyal supporters, they’ve bought the purple Pace Cars and the 205-horsepower Cease-Fire Anniversary Editions. If I owned a dealership, I’d be keen on giving one to Larry, our correspondent. How neat would it be to watch him take delivery of a new ’Vette a full 44 years after his first one? Pretty neat.
Ah, but the dealers don’t think like you and I do. If they just allocated them at MSRP to the people who “deserve” them… well, you’d see the dealers’ kids get them. And his neighbors. And his golf foursome. He might get around to you, the long-time multiple-’Vette owner. Once he has no friends left to gratify.
You get the idea. The only sane way to do this is to let the first run of C8s go to the people who are going to pay the most for them. The rest of us will have to wait. What will those early adopters get? Why, they’ll get the thrill of being first on the block, of being the toast of Cars & Coffee, of receiving admiring looks from their neighbors.
Those of us who sit on our hands will have the satisfaction of paying less—and that’s not all. We will get the recalls and the dealer campaigns and the goodwill fixes baked in before we take delivery. We’ll get a better option mix, more colors, fewer mandatory combinations. We might even decide to wait until there’s a faster Corvette available.
My advice, to Larry and everyone else, is this: Cool your jets, take your time, get the Corvette you truly want at the price you can pay. Larry, you’re 70 years old, but I suspect you have plenty of life left and plenty of time to get the Corvette of your dreams. Go in there once the bargaining tables have turned in your favor. And if you take satisfaction in walking out at invoice, don’t begrudge the dealer his satisfaction at selling the early cars above sticker. Two can play this game. Go play it in a car you’ll truly love.