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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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By WarDogLRS on 8/26/2009 4:41:56 PM , Rating: 2
Well, it looks like the economic crisis is over. Last week it was discovered in Washington that the “Cash for Clunkers” campaign worked. The program is been heralded as a fantastic success. It was so successful that after we spent one billion dollars the House rushed to give two more billion dollars and everybody is delighted that it’s going to stimulate the car industry.

But when you stop and think for a minute, it’s pretty absurd what is going on here. “Print up a lot of money, give it to a few people to buy a car and the numbers look better and therefore this is the way the economy is going to be taken care of and recovered.” But there are lot fallacies in this, obviously. This program when it was first voted on was meant to help people who had old cars and they were in the low income bracket to help them buy a new car.

It didn’t do anything of the kind. The poor people, the people with poor credit did not come to buy a car, they didn’t go through this process. As a matter of fact, this program is being paid for by the poor people, because they’re taking the clunkers off the highway. They’re deliberately hauling these in if they do end up in these car lots, they’re purposely destroyed which undermines the very market that the poor people depend on.

Not only that, the poor end up paying a bigger price for this than anybody else. Because there really is no money in the bank. We know that. They can’t tax anymore and the borrowing is more difficult than ever. So what do we do? Back to the old story again: lets just print up the money. Printing up money gives you inflation. Who suffers the most? The poor people who didn’t get to buy a car. Just like the poor people who we thought we were going to give all these new houses to with all these affirmative action programs. Guess who lost all their houses, guess who are suffering the most? It’s the poor and the low-middle income people. They are the ones who lost their jobs and suffer from the consequences.

But the really disturbing part about all this is that most people in Washington, at least those who voted quickly to put in another two billion dollars into this program, actually believe these are good programs. And they think they help the poor, they think they stimulate the economy, and it’s total foolishness.

I mean, if you had someone to come and propose, say there is a new business in town, and he needed customers. But he has a good savings account, enough to buffer himself over for awhile, and he takes money out of the savings account and goes out on the street and the passes out money. He says, “You can have this money from me if you come and spend it in my store.” And they do that and then he brings out the cash register and he says, “Wow, today I made a lot of money.”

This whole notion that government can stimulate the economy by doing this is just as absurd as that. So, we obviously still have a long way to go. And for right now, the markets and others are starting to feel a little bit better. But, quite frankly, I think we’re just digging a bigger hole for ourselves. Debt is increasing, government intervention is increasing, and there is no end in sight.

We still have the basic problems. Government is too big, they spend up too much money, they interfere too much in all our personal activities, overseas activities, our economic activities and they’re dependent on deficits, they’re dependent on regulations, they’re dependent on the Federal Reserve to keep printing money.

But I’m working on the assumption that time is running out, we are doing well and trying to expose the Fed for what they are really up to. But time is running short and I would anticipate in the next year or two people aren’t going to be cheering and saying “The only thing we need now is another Cash for Clunkers program. If it worked for cars, why can’t it work for everything else?” But truth will win out in the end, and I think this absurdity of last week and this argument that we just pass out cash and they buy cars is a help to the economy, is a complete fallacy.

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