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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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RE: From the Suburban Collection
By TomZ on 8/25/2009 3:01:47 PM , Rating: 5
I'm glad you replied. A good rule of thumb at DailyTech is "don't feed the trolls," and the problem here specifically is that Jason is a troll who is writing "news articles." His job depends on writing "controversial" articles that generate page clicks, and trash like this is how he does it.

What - pricing based on supply and demand and prices sometimes going over MSRP? That happens all the time in every industry, and in most cases there is nothing unethical or illegal about it. Only the mind of a child would think otherwise.


RE: From the Suburban Collection
By grath on 8/25/2009 7:32:00 PM , Rating: 3
Yeah I was surprised and disbelieving to see "Exclusive" in the title, and even more so when it appeared that Jason had done some legitimate investigative reporting.

If the question is "How much can you reasonably charge above MSRP?" the answer is "As much as you can get away with." Thats not immoral or unethical, thats capitalism. Is capitalism inherently immoral and unethical? Probably, but that wasnt the question.

Cash for Clunkers adds an interesting aspect though, it makes it more than a matter of supply and demand. The intent of the rebate was to make the new car more affordable to the buyer, not for the dealer to pocket that $3000-$4500. The dealer already benefits from the program through more cars being bought, but thats not enough for some, so they use supply and demand as an excuse to take the subsidy out of our wallets. That, I would argue, should cross the line into realms of legality and questionable ethics.

As far as Micktastic articles go, I suppose this one wasnt entirely worthless...


RE: From the Suburban Collection
By zxern on 8/26/2009 12:39:25 PM , Rating: 2
He never does this much research for one of his "stories". I have a feeling he was looking to buy a prius and couldn't find a deal and the "story" was born.


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