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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 clovell on 8/25/2009 4:18:15 PM , Rating: 3
Mr. Boimier,

Please explain how this is a free market economy when the government has subsidized the 'demand' that you appeal to with tax dollars. What you're doing is HIGHLY questionable in terms of ethics.

The arrogance involved in defending such tactics with a condescending lesson in economics further erodes your credibility. The only thing short-sighted here is that you actually think your back-pedalling will somehow 'defend' your reputation.

Many have argued the utility and intent of the CARS program on these forums and elsewhere, but there is quite a bit of solidarity behind the notion that it was never intended to give dealers a higher profit per copy and consumers the shaft. Mr. Mick has called a spade a spade here.

RE: From the Suburban Collection
By TomZ on 8/25/2009 5:27:53 PM , Rating: 4
I think it is absolutely ludicrous to suggest that the CARS program is wrongly enriching the dealerships. That is entirely the purpose! CARS is effectively a handout from the federal government to big business - dealerships, OEMs, and the automotive supply chain.

Let me guess - you were drinking the Democratic Kool-Aid in thinking that CARS was about helping "common folk"? LOL, you are a fool.

RE: From the Suburban Collection
By clovell on 8/26/09, Rating: 0
RE: From the Suburban Collection
By TSS on 8/25/2009 5:35:18 PM , Rating: 2
Yknow, i really do not want to defend this person or the business practices they employ. Ethically it's very wrong.

But on the other hand, he does have a point. His company is acting accordingly to the free market. If the government has tried to intervene in that market, that doesn't make this behaviour wrong, it makes the government's behaviour wrong.

If you hand out free money people are going to fight over that free money. Appearantly there's no wording in the legislation preventing markups beeing made on CfC vehicles, so how can you expect nobody to take advantage of that? (comming from the same guys who handed out a free trillion, i ain't suprised).

Besides wether a consumer or a dealership gets that $4,500 it's still comming from the tax payers, who are the consumers. To top it off you cannot get $4,500 unless you spend more then $4,500 at a time when consumer debt is at an all time high? So ultimatly, it *was* designed to give them the shaft, no matter how you slice it.

Forget what's wrong for a moment, let's discuss what's *more* wrong: This company breaking ethics on solidarity and applying free market principle, or the government breaking free market ethics and applying solidarity principles?

RE: From the Suburban Collection
By Keeir on 8/25/2009 6:17:38 PM , Rating: 2
But on the other hand, he does have a point. His company is acting accordingly to the free market. If the government has tried to intervene in that market, that doesn't make this behaviour wrong, it makes the government's behaviour wrong.

Pretty much.

RE: From the Suburban Collection
By DigitalFreak on 8/25/2009 7:57:55 PM , Rating: 2
Come on! Everyone knows that car dealers are the scum of the earth. It's always been a three way race between them, lawyers and politicians.

RE: From the Suburban Collection
By Smilin on 8/26/2009 9:46:02 AM , Rating: 2
Here, here!

I'm in the middle of a multimonth saga of getting a component repaired that only the dealer can handle so I'm forced to go to them. They are buttraping me on labor, diagnostic fees, parts and more parts, and more labor.

Today at least I'm going to say that car dealers are winning that race.

RE: From the Suburban Collection
By tmouse on 8/26/2009 8:31:52 AM , Rating: 4
You would have a point if Toyota was the only dealership involved in the program and people HAD to go to them. The point of fact is the government does not specifically care one way or the other, the goal (misguided or not) was to "stimulate" auto sales, plain and simple. NO one was forced to pay that price it was entirely the decision of the buyer. There is no ethical dilemma here, people were not compelled in ANY way to deal with these greedy people. They had an item there was no moral imperative to make as little money as possible on cars sold through the program. The program offered an incentive, many dealers offered greater ones (many HAD to), Toyota did not need to on their Prius lines and in fact could charge more. This is not morally or ethically wrong since they were not taking advantage of anyone, EVERYONE was free to choose and either take the price or pass. If there was ANY requirement concerning the Prius I would agree with you but there was not. I'm sure many dealers who jacked up the prices will pay in the long lean months to come, some dealers who dropped the prices will also fail in the months to come.

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