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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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This is free-market economics.
By CZroe on 8/27/2009 3:08:56 AM , Rating: 2
This is free-market economics. It's totally fine to ask for more than MSRP when there are customers willing to pay it. In fact, it's illegal for the manufaturer to fix the price (see what happened to Nintendo with the NES). The "S" in "MSRP" means "SUGGESTED" after all and that's precisely why the manufacturer only "suggests" a price!

On the other hand, it's a little different when the dealers enter an agreement and then try to violate it to get more money from you. I dealt with this same situation last year when I bought a 61MPG Kawasaki Ninja 250R.

Most people in populated markets were paying up to and sometimes more than $5,000 out-the-door (includes tax, tag, & title). I had to pay MSRP ($3,500) plus over $250 in dealer fees and another $250+ in taxes and registration BUT I had to drive 600 miles to get it. The local dealers were intent on ripping me off. One even sold my reserved bike to another customer offering $1,000 more despite me having a deposit on it for months in advance! They double-deposited it and didn't tell me until after it arrived and was sold off to the higher-paying customer.

These particular bikes were selling for much more USED than new due to >$4.50 a gallon gasoline. Even the previous generation (1988-2007) which topped out at $3,000 MSRP on the last year model (2007) was commanding $4,000 to $5,000 on I'm not sure if they were actually selling for that but, at an even-better 85MPG, they may have been!

The dealers weren't the only ones getting in on the action. Rather than wait for the next model year to increase the MSRP by $500-to-$600, Kawasaki canceled the rest of the '08 models, one of which I had *another* deposit on, then turned around and sold them as "early-release '09 models." Dealers with unfulfilled stock got ONE to hold them off as Kawi manufacturing began stocking up on '09 bikes (only change was the color) with a $500 higher MSRP. Even the early-release came with the $500 price-hike and the official color, now a "Special Edition" was $600 more.

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

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