Car Manufacturers Playing The Blame Game

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The average price of a new car is higher than EVER, and while there is enough blame to go around, automakers are busy pointing at the car dealers.

Ahhhh, the Blame Game…

Such a fun game to watch, right?

We see the Blame Game played out most often in politics.

One side says or does this, the other side says or does that, then something goes wrong and they both point at each other and say, “See! It’s their fault!”

That’s how the game is played regardless of the arena, be it politics, work, or just between two squabbling kids.

There’s only one way to play the game: point your finger and say, “It’s YOUR fault!”

But here’s the thing about the Blame Game: there really are no winners because who’s at fault when things go bad really doesn’t usually matter.

What matters is the solution to fix that problem. But when many people are fixated on figuring out who to blame, they forget about fixing the issue.

When I bang my pinky toe on the corner of my bed, do I blame myself for walking too close? Or do I blame the bed for being there?

I can tell you, as much as I would really like to blame the bed, it’s 100% my fault for not treading more carefully when I’m barefoot.

We’re seeing the game being played out in the auto industry right now as consumers are paying higher prices than ever for a new car…and instead of solving the problem, the related parties are too busy pointing fingers.

“It’s YOUR Fault!”

On average, the price of a new car in the US is up across the board, costing more than any time in history.

The automakers are trying to step out of the line of fire by pointing towards the auto dealers, who seem to be taking in more profits than they have in previous times.

In fact, JD Power and Associates, an analytics firm that tracks car prices, revealed that at Ford, the average price is growing FASTER than the company earns on car sales. That means that dealers are grabbing a BIGGER piece of the overall pie.

Of course, it’s not like Ford (F) is hurting. They’re doing pretty well right now too. In fact, they’re even climbing on the Power Stock ratings…

Look at their numbers here:

Not that there’s anything wrong with profiting. That’s the name of the game in business, right?

However, there comes a time when it looks like one party is taking advantage of the other – and in the auto industry’s case, it seems that the dealers are taking advantage of both the manufacturers AND the customers.

These dealers have got the perfect built-in excuse for jacking up prices: supply chain issues.

All value rests on the supply-and-demand aspect of economics, and right now, with the pandemic slowing down the supply chain, the demand is high while the supply is low.

This is allowing dealers to jack up prices just because they can.

The Manufacturers Have A Point

Dealers can charge whatever price customers are willing to pay, and if they get it, they win…and car dealers are winning an awful lot these days.

While automakers typically recommend a retail price when they sell their vehicles to dealerships, dealerships are not obligated to follow their suggestion. With automakers struggling to produce enough cars to meet customer demand due to the microchip shortage and other supply chain constraints, the prices of both used and new vehicles have risen to historically high levels.

In fact, the average new US car sold for more than $47,000 in December, according to Kelley Blue Book. That’s a 13% increase from the year before.

While that’s shocking, there’s an even more shocking number to discuss…

In January, 80.3% of car sales in the US went for more than their suggested sticker price. In 2019 just 0.2% of car sales exceeded the suggestion.

It’s clear that something is happening here, and I think it’s even more clear that it’s the dealers playing both sides against each other.

However, equilibrium will be found eventually. Eventually, when the chip shortage will be a thing of the past and the supply chain will be chugging along like usual, the dealers will be back on the poo end of the stick soon enough.

For now, if you want a new car, it’s best to wait. However, if you NEED a new car, bring this article along as proof that they’re trying to fleece you. Use it as a bargaining tool to get a lower price on whatever because you’re eyeing.

You never know…it may just work!

“It’s joyful to give – but for people that want to take advantage of you – you’re kind of an easy mark.” –Larry King

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