Good afternoon, ladies and gentlemen, and welcome to Letters to Doug, a weekly feature that involves you sending over your questions and me reading them at 2 a.m. while I sit around in my underwear.
If you enjoy Letters to Doug, I have good news: you, too, can participate! Just send me an e-mail at Letters2Doug@gmail.com, or Tweet me at @DougDeMuro. All names will be changed to protect the question asker, in case you want to admit something embarrassing, like the fact that you bought the current Volkswagen Passat. We call this the DeMuro-Client Privilege.
Today’s question comes to us from a reader named Clarence. Of course, Clarence isn’t actually his name, because nobody is named Clarence anymore, sort of like how nobody is named “Ballaban.” But anyway: “Clarence” lives in the Los Angeles area, and he’s trying to buy a limited-production new car. He writes:
I have been going through some frustrations lately trying to buy a new car. I understand it’s against the Jalop way but still. I am cross shopping a GT350R and a Cayman GT4 but I can’t seem to get any dealer to do away with the markup. Do you have any tips on getting a limited production car at MSRP or less?
For those of you who don’t know what Clarence is talking about, allow me to explain the situation with rare, limited-production vehicles. When manufacturers produce these vehicles, one of two things happens: either a) the car is an enormous success and the dealers charge a markup, or b) the car is a huge flop, and the dealers burn them in order to collect insurance money.
In recent years, we’ve seen examples of both. For instance: just two a few short years ago, BMW debuted a high-performance coupe called the “1 Series M,” and assumed that nobody would buy it, because BMW’s recent strategy has primarily involved creating smooth, luxurious hatchback versions of everything in sight, including the coffee machine in the service department waiting lounge.
So BMW only made a limited run of these cars. But then it turned out there are still people who like to drive BMWs, and not simply place big things in the enlarged rear ends of the hatchback models, so the demand for this thing was off the charts. So off the charts, in fact, that BMW dealers were marking them up ten and twenty grand above the factory retail price in order to earn the sweet, sweet profit that BMW didn’t think was there. In fact, three years later, these things are still going for MSRP, even after they’ve done more track days than the Marussia F1 team.
But then, on the other end of the spectrum, you have the Nissan Murano CrossCabriolet, which was essentially a Nissan Murano attempting impersonate a Chrysler Sebring convertible. What happened here was, Nissan decided to offer the Murano with a convertible top and only two doors, and then they decided to charge $45,000 for each one, even though all relevant market research suggested that customers would actually rather chew off their own thumbs.
So these all ended up going for well under MSRP, and I am told that Nissan dealers stuck with leftover models are now trying to weld fixed roofs back on and add two more doors, because that’ll be “cheaper than trying to sell these pieces of crap.”
So now we return to Clarence’s question, which is: when you’re faced with a limited-production car like the Cayman GT4 or the Shelby GT350R, how do you avoid the markup?
Well, Clarence, here’s the thing about supply and demand: when supply is low and demand is high, people will sometimes pay ridiculous money in order to get things. If you need any proof of this, head over to Zillow and check out Manhattan real estate. You will find approximately ten zillion listings priced between $1 and $2 million, including roughly three with a functional washer and dryer.
Cars are the same way. The Cayman GT4 and the new Shelby GT350R are two of today’s hottest vehicles, which means you’re competing against a long line of people for what will likely amount to less than 2,000 cars. In this case, the people who pay markups get the cars, and the people who don’t will have to wait.
And so, Clarence, you have two basic choices: either you’ll have to wait, or you’ll have to pay. Because when it comes to low-volume, high-demand cars, the “MSRP” should simply be ignored. It’s an irrelevant figure; an arbitrary number that has no real basis in fact. As businesses, dealers are free to charge whatever the market will bear, and believe me when I say that they will. And you, as the consumer, will haggle with them, even if they’ve priced the car at $9.25 and a glass of Diet Coke. (“Does the glass have to be FULL?”) This is the way of life in the car business.
In other words: don’t think of the markup as a markup at all: think of it as the actual market price, set by supply, demand, and a bunch of crazy rich people who want to one-up their neighbor who merely has a Cayman GTS. If you don’t want to fork over the cash, so be it: you’ll go home happy that you didn’t spend “too much” on a new car. But the people who sucked it up and paid the markup will go home happier. Because they have a brand-new sports car in the garage.
@DougDeMuro is the author of Plays With Cars. He owned an E63 AMG wagon and once tried to evade police at the Tail of the Dragon using a pontoon boat. (It didn’t work.) He worked as a manager for Porsche Cars North America before quitting to become a writer, largely because it meant he no longer had to wear pants. Also, he wrote this entire bio himself in the third person.