I kind of wanted this to be a separate thread, since it responds to the various complaints about dealer markups on the board.

I essentially want to say that supply vs demand isnt much of an excuse for markups on RX-8's... It seems like it's an automatic reflex that people regurgitate in this situation. Yes, I know its how the market works and people can charge whatever they want, but when it's used as an excuse for dealers to charge premiums, people are basically ignoring the quantity side... which makes sense for low volume production like an m3, m5, 360 modena, or enzo, but not for the RX-8, since mazda wants to try to sell upwards of 30,000 units... which i think is somewhat high for a pseudo sports car.

It's been said somewhere that mazda HAS to sell this many RX-8's, otherwise future rotary cars will not be produced, which I take to mean as the future of the company being at stake. And although I guess this depends on consumer elasticities, I would say Wal-mart logic should take precedence... in other words, the RX-8 is pretty much well priced (at MSRP) and positioned to take a large or sufficient chunk of the market. Therefore, markups stand only to reduce the long term supply, which is bad for both consumers and mazda. Mazda's self interest lies more so in stably priced, relatively volume-oriented business... and more so than in other considerations such as exclusivity where markups are useful to the carmaker as signals of product quality(mercedes, porsche, ferrari).

So the only player to gain from a markup is clearly the dealer. But consider exactly what enables them to actually make the markup... It's not so much demand outstripping supply (since I would be willing to bet Mazda will reward high-volume dealers with higher-volume allotments) but I think more so due to search costs to the consumer. The only reason they can make markups is because of imperfect information in the market; the consumer doesnt really have any other source of information (except maybe rx8forum) about who applies markups, especially since dealers don't willingly and forthrightly provide information about it until consumers are on the lot.

...I think there are other market distortions going on here but the point is that markups are made possible not by supply and demand but rather by *passive distortions* of supply and demand, or the failures of the market ideal. Of course it makes sense for the dealer to take advantage of this... because of self interest for one thing which is perfectly understandable but also since apparently there are no laws against not being forthright about pricing information in the market. However, I don't think the reasons for markups are supported by free market fundamentals.

This happens with every new model launch...a lot of hype and excitement translate in to greedy dealers charging markups. Its an absoulte joke for anyone to pay a markup on the RX-8 or for any car for that matter. Has anyone seen the auto sales numbers lately? They are down the tubes. Dealers will be begging for business. I guarentee you I can walk in to a Nissan dealer and get a new Z for $500 over invoice. The same will happen with the RX-8 in due time.

I think the Law of Supply and Demand still applies here but just in a different way. If you look at Supply being the current number of RX-8 on the road, (or any new cars as a matter of fact) you will easily see why this law applies. What We have here is a bunch of people who wanted to one of first people to get this car and since there aren't many of these new car out there, it automatically becomes a commodity, Regardless how many cars the auto maker are producing or planning to sell.

You want an example ? Two years ago when the long anticipated Sentra SE-R came out, there were still a markup for them during the first few months of sells and as we know this car is not exactly a collector's item nor a limited edition.

It is all about the dealer taking advantage of us guys who just couldn't wait to get our hands on their cars and those who wanted to be the first's to get it.

yes precisely... what you're ignoring here (as Smoker was pointing out) is the factor of TIME... over time, demand and supply will change, thus changning the true market value of a good.

in this case, there is zero supply of RX-8's for sale on the open market, and there is a LOT of buildup for demand. this leads to initially high prices ('cause i'm sure that there ARE people who're willing to spend $2k over MSRP to be the first in line at the local dealership, 'cause they know that they otherwise wouldn't get a car until December), but as time progresses, and mroe and more units are available for sale while hype for the car (hopefully doesn't) dies down, your supply increases and demand decreases, leaving you with a lower market price for the car. this of course means higher volume sales at lower margin for the dealer, which i'm sure they'd be happy with, and Mazda would be exctatic that their wankel car is a market competitor.

any way you slice it, S+D is an adequate way to reason out the prices, justified in your eyes (it wouldn't be in mine either) or not. :)

Wasn't it the same as the MazdaSpeed Protégé? At first they announced the car to be a limited edition/version or what-so-ever, only selected dealers are able to get a limited amount of that car, and they expect a large number of people want the car, so they put a huge mark- up on it. However, seems like the sales aren't that great (I see lots of those sitting in dealers around), so you might be able to get one now for a few couple hundred bucks over invoice or may be at M.S.R.P.
Anyway, really have to see how the market is when the RX-8 comes out and available at the dealers (not pre-order). But I wonder whether the X-Men 2 movie will helps draw people's attention, may be even their yearn for the car, and increase the demand of the RX-8?

Originally posted by ProtoConVert
I kind of wanted this to be a separate thread, since it responds to the various complaints about dealer markups on the board.

I essentially want to say that supply vs demand isnt much of an excuse for markups on RX-8's... It seems like it's an automatic reflex that people regurgitate in this situation. Yes, I know its how the market works and people can charge whatever they want, but when it's used as an excuse for dealers to charge premiums, people are basically ignoring the quantity side... which makes sense for low volume production like an m3, m5, 360 modena, or enzo, but not for the RX-8, since mazda wants to try to sell upwards of 30,000 units... which i think is somewhat high for a pseudo sports car.

It's been said somewhere that mazda HAS to sell this many RX-8's, otherwise future rotary cars will not be produced, which I take to mean as the future of the company being at stake. And although I guess this depends on consumer elasticities, I would say Wal-mart logic should take precedence... in other words, the RX-8 is pretty much well priced (at MSRP) and positioned to take a large or sufficient chunk of the market. Therefore, markups stand only to reduce the long term supply, which is bad for both consumers and mazda. Mazda's self interest lies more so in stably priced, relatively volume-oriented business... and more so than in other considerations such as exclusivity where markups are useful to the carmaker as signals of product quality(mercedes, porsche, ferrari).

So the only player to gain from a markup is clearly the dealer. But consider exactly what enables them to actually make the markup... It's not so much demand outstripping supply (since I would be willing to bet Mazda will reward high-volume dealers with higher-volume allotments) but I think more so due to search costs to the consumer. The only reason they can make markups is because of imperfect information in the market; the consumer doesnt really have any other source of information (except maybe rx8forum) about who applies markups, especially since dealers don't willingly and forthrightly provide information about it until consumers are on the lot.

...I think there are other market distortions going on here but the point is that markups are made possible not by supply and demand but rather by *passive distortions* of supply and demand, or the failures of the market ideal. Of course it makes sense for the dealer to take advantage of this... because of self interest for one thing which is perfectly understandable but also since apparently there are no laws against not being forthright about pricing information in the market. However, I don't think the reasons for markups are supported by free market fundamentals.

dealers make profits on markups, the company doesnt get the profit. this is true for all cars.

i personally think the rx8 is underpriced, they need to charge more.

we have had several people even crying about the MSRP. they say they will NEVER buy a car at MSRP. prolly 1 of the dumbest things i ever heard. why is it ok for customers to buy at under MSRP but it isnt ok for dealers to charge over MSRP?this is capitialism, and this is what makes our country great. dealers are in the business of making money, and if they can charge an extra few bucks on a car that they know people will buy, then why not. and im not taking bout the outragoues 20k markups like on the evo. putting a few extra 1 or 2 thousand on it, should be/and is prefectly ok. if u cant afford it, then dont buy it. its that simple. capitialism is great.

Although yes, for the most part, dealers can charge whatever they want for their cars, the manufacturers do have the "power" to control their pricing habits by controlling the dealer's allocations. Some manufactures such as Lexus have internal mandates to that effect.

I'm all for capitalism, but the problem with markups is they are counterproductive. They will yield some initial spikes of income for the dealer, but in the long run will even out or actually come out to less profit overall because they could have been selling more cars and getting higher allocations as a result of selling for MSRP or below.

Actually my biggest concern with car dealers these days and as of a few years ago are the dreaded "DEALER FEES" that have now magically appeared on all dealer buyers orders. It's now not enough to go through a negotiation process and make the final price + tax and tag that has always been tradition, dealers now write in these "non-negotiable" dealers fees as a way to make you feel like you've gotten the car for what you wanted only to turn around and make some additional profit back. These fees are just added profit, plain and simple, because the dealers are suppose to be covering their costs with what they are making on the car, not adding it in as an additional "fee" after you've already negotiated what you are willing to give them for their car.

I have never paid dealer fees and absolutely refuse to do so. That's why I always mention them up front so that the dealer knows that I'm aware that they have an "ace in the hole" when trying to add up the final numbers on the buyers order. If they give the old line of "we can't take it off because it would be illegal" or "even our sales people have to pay dealer fees" or any number of other excuses, I just make sure to negotiate that much harder on the actual "price" of the car to negate the adding of the dealer fees.

So in a way, "DEALER FEES" are a markup they try and get on EVERY car they sell these days!

BTW....I am NOT paying dealer fees on my RX-8.... :D

Originally posted by tribal azn2
why is it ok for customers to buy at under MSRP but it isnt ok for dealers to charge over MSRP?

Good call tribal, I could not agree more. It all comes down to who wants "it" more. "It" being the car for the customer, and "it being the sale for the dealer. If someone wants the car bad enough to pay 1, 2, or even 20k over MSRP, then the dealer has every right to sell it for that much. You have to remember, there is no guarantee to the dealer that says you won't go down the street and buy it at MSRP from the competitor. It is supply and demand at it's finest...

Any dealers out there care to take a stab at the "dealer fees" ?

What exactly are they for?

Would you be surprized if a three-pointed star on this product
listed at 10 Grand more?

Originally posted by Digisan
Any dealers out there care to take a stab at the "dealer fees" ?

What exactly are they for?

same idea as the bank's Administration or User Fees... actually, even airports have user fees these days (in Canada at least... and it's only $12 anyways, but rich idiots still bitch)... *sigh*

Originally posted by wakeech


same idea as the bank's Administration or User Fees... actually, even airports have user fees these days (in Canada at least... and it's only $12 anyways, but rich idiots still bitch)... *sigh*

Acutally, the Doc fees are more like the user fees you are comparing them too since they are typically around $50 US. I can live with those. What I can't live with is when a dealer tries to tack on anywhere from $295-$695 (at least this is the range I have personally seen) worth of dealer fees to the negotiated price (unless they agree to give me the car for invoice or lower :p ). Not gonna happen! At least not to me. ;)

I'm not cheap....I just like to deal on cars with upfront figures, not dealer tricks and gimicks for cushioning their profit. ;)

Originally posted by tribal azn2


dealers make profits on markups, the company doesnt get the profit. this is true for all cars.

Well, yes... and no. The way that car dealers make money used to be very different than it is today. There are several ways that a dealer can make money on a car today and selling it at over MSRP is not even the most attractive. Most manufacturers, even the import ones now, are holding dealers to a MUCH smaller margin on new cars than there used to me. With "dealer hold-backs", "incentives", "special promotions", "rebates", etc. The dealers used to make considerably more than they do now. These days, it is all about the "points".

Most dealers will offer in house financing and will sell you a loan package or lease package on a car that is at a higher rate than that buyer would typically qualify for elsewhere. Keep in mind that my selling you a loan on a $28,000 car at 1.5% more than the going rate elsewhere for a 6 year loan, They make over $1,200 more. By brokering the loan themselves, they can make another 1.5% for a total of $2,400 profit just on the financing.

By adding dealer fees for paperwork they get another $200-$500. By adding dealer installed options, they can make another $500 - $1,000 per car. And the list keeps growing. So, typcially, even a car sold at "invoice" is still a good deal for the dealer since there are often rebates or incentives that the manufacturer provides to the dealers to allow them to sell at invoice. The real money is made on the loans and leases as well as the services, options, etc. So don't feel bad for the dealers and don't get fooled by the "great deals" out there.

Also, do the math on any lease BEFORE you buy. Keep in mind while the payments appear to be lower, the overall cost of ownership is MUCH higher. Lease typically have built in financing rates of 10%, 15% and even as much as the law allows at 23.99%, so do the math before you buy... with interest rates so low, DON'T LEASE!

I prefer to buy rather than lease. I did lease a mazda MPV Allsport 4wd when they came out. I only paid $204 a month and only put $250 down. I knew I wasn't going to keep it because I was going to get the Mazda MPV Van when it came out. I just took it in and tuned in my keys and bought a new MPV Van when my lease was up. This isn't the norm though, most of the time you have a huge downpayment you have to make in order to get the low lease prices. I agree with the gentleman aboves post, buy don't lease. The interest rates are great right now for new vehicle loan and you won't be throwing your money away.

I think most of this thread has valid reasoning regarding this. I don't view the Law of Supply and Demand as an excuse for dealer mark-up, but rather, the mark-ups are a result of this. The dealers will certainly spew this tripe as an excuse, but I think we all recognize most dealers and employees don't know squat.

There is a very tenuous relationship between prevailing market price, supply and demand, and time. When looking at a traditional pricing model with supply and demand curves, the equilibrium point is where these two curves meet. This dictates (in theory) what the prevailing market price will be, at a fixed point in time. As the supply and demand levels change, the equilibrium point will shift, setting a new price. Of course, manufacturers of goods (and providers of services) can play a role in dictating the equlibrium point, through production volumes and/or generating a want/need for the goods/services. There is a lot more flexibility for large ticket items like cars and houses.

Case in point, when looking to buy a brand new xbox or PS2 from a store (Best buy or circuit city) you will find the selling price is almost always $199. They may be throwing additional pieces as an incentive to buy, but the price has always been the same at all retailers. Is this price fixing from the manufacturer? Well, the have been investigated for it by the FTC.

Mazda can play a role here. They can take proactive stances, such as dictating to dealers not to charge over MSRP ( but would this be construed as price fixing?), or they can manipulate the production of cars so that supply will always meet demand (difficult to do). Or they could take a reactive stance, punishing dealers who charge a markup by restricting their future allocations.

I knew that economics degree would come in handy someday :D