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Some customers were just breaking even with cash-for-clunkers or even worse

While many of the domestic automakers offered steep price cuts on top of "Cash for Clunkers", many buyers chose to purchase vehicles from foreign manufacturers instead.  Leading the pack was Toyota, whose Corolla was the leading vehicle purchased under the program by the first week of August.  Even recently retired Sen. Bill Frist (R-Tenn.) traded in his 1991 Chevrolet Suburban for a brand-new Toyota Prius, joking, "You don't see a lot of Republicans driving a Prius." 

Now it appears that a handful of Toyota dealers raised their prices to offset the government rebate and cash in on the high demand for its vehicles.

DailyTech has an exclusive inside look at some Toyota dealers' so-called "market value adjustments" (MVAs) on popular vehicles such as the 2010 third-generation Prius hybrid.  With the typical sticker price of the Prius coming it at around $26,000, many dealers across the country have been charging $3,000 to $10,000 markups, more than offsetting the "Cash for Clunkers" rebate of $3,000 to $4,500 in some cases.

On the forum PriusChat, one customer reports, "We live in Lake Placid Fl. and could not deal with the dealer here. One charge they wanted was a market adjustment for this area of $3999.99 also dealer fees of $695.00."

A number of others on the same site share similar stories of their own.  States one buyer, "A certain dealer in NJ that I am not at liberty to mention charges 6500 over sticker and calls it fair market value adjustment. luckily I found another one close by with better morals. They are charging sticker price and not a penny more."

Speaking with a trusted source who had recently been shopping for a Prius, DailyTech was able to confirm one such dealer that was spiking prices.  Located in the heart of the U.S. auto industry, Suburban Toyota of Troy, Michigan was charging more than a $2,000 markup on a Prius it had in store. 

States our source, "Suburban Toyota in Troy was one of the ones that wanted a $2,000 additional fee over the MSRP, to the best of my recollection. The other places weren't named, but only referred to by a salesman who was offended by the other dealerships charging what he said was price gouging. I thought it was like ticket scalping. They know they have a hot item and could probably sell all they have, even for $5,000 additional MSRP. The Prius is a great car but they didn't produce enough, especially ones with the amazing solar roof that keeps your car cool when it's parked in the summer."

Hoping to gain further insight into this, DailyTech posed as an eager buyer and called Suburban Toyota.  The following is our conversation:

DailyTech:  "I've been calling all over trying to find a new 2010 Prius and no dealerships have any in stock.  Do you have any?"
Sales Agent:  "We do... it's been sold to Ford but the sale isn't finalized yet."
DailyTech: "But I heard from another dealer that I might have to pay more than the MSRP on it -- something about MVA or something like that -- is that true?"
Sales Agent:  "Yes"
DailyTech "How much more?"
Sales Agent:  "About $4,000 to $5,000."

The sales agent went on to elaborate that we might be able to buy it if we moved fast.  The agent explained, "When one comes in, typically it's sold before it even gets the chance to hit the lot."

DailyTech then proceeded to contact six other Toyota dealerships in lower Michigan.  None of the other dealers had stock in, but when related a slightly altered version of the story of the MSRP markup by Suburban, they all said that they sold their vehicles at MSRP.  A couple expressed shock or surprise at the development, but at least one commented, "I know who you're talking about."

It appears that most dealers are clean, but based on the feedback DailyTech has picked up on in various Prius forums, there are dealerships in at least several states that are similarly price gouging on the 2010 Prius via MVA's. 

Toyota was contacted by DailyTech and we are awaiting their comment.

Markups such as these are really nothing new, but are typically limited to low-production vehicles or vehicles that have been recently introduced.  The Prius itself has also been the victim of occasional price gouging since its introduction in the U.S.  While it's unknown exactly how many people were willing to pay the MVA's on the Prius, the fact that the elevated MSRP erased or even surpassed the Cash for Clunkers rebate was likely a hard pill to swallow for many buyers.

Update 1: One of the dealerships DailyTech contacted earlier this morning received a vehicle this afternoon and offered it to our "buyer" at MSRP.  This essentially invalidates the argument that no vehicles are available on the local market.

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Supply and Demand
By Alexstarfire on 8/25/2009 2:10:00 PM , Rating: 5
Wait a minute.... you mean they are charging more money for a product that is in high demand but low supply? I'd never have guessed that would ever happen. Jesus Christ people, just give it some time for the supply to balance out. I hardly call it price gouging when you charge more for a product you have in short supply.

RE: Supply and Demand
By Alexstarfire on 8/25/2009 2:12:55 PM , Rating: 5
Assuming short supply of course. If not...... then it's still not price gouging as a car certainly isn't a necessity. Just don't buy that overpriced car at that specific dealership.

Stupid consumers are always the most profitable ones.

RE: Supply and Demand
By Smilin on 8/25/2009 2:14:05 PM , Rating: 2


RE: Supply and Demand
By MrDiSante on 8/25/2009 2:22:22 PM , Rating: 3
Agreed. Microeconomics 101. You provide rebates for something with a virtually inelastic short-run supply, what's going to happen? Those rebates are gonna end up right back in the pockets of the suppliers. If/when Toyota decides to ramp up production, prices will fall. Meanwhile, I hope the Obama administration enjoys handing over money borrowed from China to dealerships.

RE: Supply and Demand
By DotNetGuru on 8/25/2009 3:52:18 PM , Rating: 2

RE: Supply and Demand
By Hiawa23 on 8/26/2009 8:45:19 AM , Rating: 2
Meanwhile, I hope the Obama administration enjoys handing over money borrowed from China to dealerships.

Is this a new concept? The govt has been handing over borrowed money from China long before Obama took office. Seems odd that now some want to say or blame Obama for this mess that has been decades in the making. It's scary the hate many are pushing all across this country & it's really starting to concern me as this is all some radicals need as an excuse to do something terrible, & set our country back another 10-20 years in relations. I hope we wise up before something happens & try to find solutions to these issues instead of pushing blame on someone.

RE: Supply and Demand
By TomZ on 8/26/2009 5:37:09 PM , Rating: 2
Is this a new concept?
No, but Obama has put all past presidents to "shame" in terms of their ability to spend money that we don't have. Granted, there is the recession to deal with, but the huge debt from the current administration's spending is going to be with us for a long, long time.

RE: Supply and Demand
By Smilin on 8/27/2009 10:31:35 AM , Rating: 2
He's no where near Bush or Reagan although he is heading in that direction. Try to understand the "why" though.

When the economy goes into a cycle where consumers buy less, factories lay off, which causes consumers to buy less then the govornment steps in to become a consumer.

You have to deficit spend to give a "shot of nitrous" to the economy. Same thing Reagan did very effectively after the Carter administration. The problem this time is that Bush handed Obama an empty nitrous cuts during war. f'n retarded.

RE: Supply and Demand
By The0ne on 8/25/2009 4:00:46 PM , Rating: 2
Well I agree with you somewhat but I still think it's gauging to some extent when the price is by a large amount. There really isn't anything new about this news. Dealerships have been doing this for ages. Here are the recent markups last year when I was out shopping around for a new car.

1. Honda Fit - about 4-5k markup from MSRP. Into the Civic territory. Why would you want a Fit over a Civic?

2. GTR - at least 7k markup

3. EVO X - at least 3k markup. Had to find the right dealership to get below MSRP :)

4. Smart - at least 4k markup. This one actually surprised me. The salesman was the one that told me how they were marking them up and told me to pass on it lol

5. BMW M3 2009 - I think 8k markup, lost interest quickly and got my reserve money back after finding out the price O.o

6. Lexus IS250/350 - 4k markup simply because here in San Diego they can :) It's a very popular car here.

I'm sure there are others but these were the ones I was interested in. Either sports or economy :D

So Prius is going the same route due to demand, A LOT of demand, so go figure if dealerships want to make some money :) Seriously, there is so much demand Toyota has shifted "teams" from other departments to help with production; at least 40+ teams!

RE: Supply and Demand
By darrenk on 8/25/2009 5:00:43 PM , Rating: 2
The Honda Odyssey was the flagship for market adjustments in the first part of this decade. You'd be on a waiting list for 3 months or more if you didn't want to pay over MSRP. Then you'd get a weekly call saying the dealer just got an "extra" allocation but they all have a few thousand worth of accessories, paint sealant, undercoating, fabric protector, etc, etc. Despite the waiting list, there were always some on the lot with a big market adjustment for those willing to pay. And someone was always willing. Hard to fault the dealer for charging what the market will sustain, even when done in a sleazy manner.

The Prius was not quite as bad in Chicago earlier this month. Dealers were selling them as fast as they came in at full MSRP, though. Most didn't have one to test drive, either and some were taking orders for those coming in the next few weeks.

Not all dealers were charging MSRP. The Carmax new Toyota dealer had two for $500 under MSRP on their website the day we wanted to buy. Not a great deal by any means, but we ended up buying one from them a couple weeks ago.

RE: Supply and Demand
By marvdmartian on 8/26/2009 10:05:17 AM , Rating: 2
Same sort of markups came about for the Chevy Malibu when they came out with the new design for 2008. People wanted them, and dealerships were willing to charge a couple thousand more while the car was hot.

Doesn't make it right, though.

And they wonder why we call them STEALerships!

Of course, there's nothing wrong with getting together a mob with pitchforks and torches under these circumstances, right? ;)

"I modded down, down, down, and the flames went higher." -- Sven Olsen

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