Ford Threatens to Cut Dealer Inventories to Demolish Price Markups
The new car market has seen a lot of changes in the past couple of years. Car buyers went from distancing themselves from car lots in 2020 to hitting the lots hard in 2021 as the vaccine kicked in. This large uptick in demand and decrease in inventory led to many dealers nationwide to price their new cars at an all-time high. Kelley Blue Book reports that the average price of a new car in December 2021 was $47,000, which is a $6,000 increase over the previous year.
Nowadays, nearly everyone pays over the sticker price for a new car to the point that it’s practically the norm. For example, many Ford dealers nationwide have marked up some of their popular models considerably to take advantage of the demand, but the corporate office, specifically CEO Jim Farley, is not too pleased.
Ford is asking dealers to cut down on markups
Dealerships marking up popular in-demand models is nothing new. Many Honda dealers, for example, routinely markup Civic Type R models to extraordinary prices the moment they hit the showroom floor. Ford dealers are doing the same thing as customers added their names to reservation lists for new models like the Ford Maverick, Ford F-150 Lightning, and the Ford Mustang Mach-E electric SUV starting last year.
The Detroit Free Press reported that it has come to the attention of the Ford corporate office that some dealers are demanding that customers already on the waiting list must pay additional deposits or payments for their F-150 Electric. However, Ford CEO Jim Farley recently voiced his concerns that these markups could taint the Blue Oval’s relationship with its customers.
As such, Ford’s Vice President of Sales, Andrew Frick, sent letters to dealers that stated: “It has come to our attention that a limited number of dealerships are interacting with customers in a manner that is negatively impacting customer satisfaction and damaging to the Ford Motor Company brand and Dealer Body reputation. These actions are perceived as threatening customers by withholding their opportunity to convert reservations to orders. This behavior is not allowable.”
Ford threatens to cut dealer allocations
While the warning could be enough to scare dealers into excluding any markups, the letter continued on with potential repercussions should any dealership not comply. It read, “The dealer shall avoid in every way any ‘bait,’ deceptive, misleading, confusing or illegal advertising or business practices,” the letter continues.
“If it is determined that your dealership is engaging in such practices, Ford Motor Company reserves the right to redirect that dealerships allocation of the F-150 Lightning.”
That’s a pretty harsh punishment, but rightfully so. If a customer orders a car at MSRP, then that’s what they would normally expect to pay, not more. But Ford also addressed the F-150 Lightning buying and selling from the customer’s side too. In an attempt to prevent F-150 Lightning customers from buying and immediately selling the truck for a profit, Ford is offering support to dealers for a no-sale provision that can be signed by the customer when they take delivery of the vehicle. Ford’s provision implements that customers cannot sell, offer to sell, or trade ownership of their truck within one year of when the truck was purchased.
If you have ordered a car, then you can protect yourself
In case you plan to order a Ford F-150 Lightning in the near future or any new vehicle for that matter, Kelley Blue Book recommends one tip to protect yourself: Get it in writing.
That means that you should always get a purchase agreement with the car’s final price on it from the dealership before giving them any money. That way, you can be sure that you’re getting the car that you want for the agreed-upon price that you’re going to pay. No mark-ups, no excuses, no funny business.