There was a time when, if a new and exciting vehicle hit the marketplace, consumer demand for it was exceptional for years on end. For those old enough to remember, when Smokey and the Bandit, starring Burt Reynolds, made it to theaters in 1977, it set the hearts of young male consumers in the Southern states on fire for the Pontiac Turbo Trans Am — especially one with black paint.
Here in Dallas Fort Worth, salesmen fought over any unsold Trans Ams that came in, while one salesman who worked for us in Dallas literally turned any customer who came in wanting to buy any Pontiac but a Trans Am over to his fellow salesmen; he waited on only those specifying a Trans Am. His earnings for one month’s sales totaled slightly over $8,000, because everyone who wanted that car knew they sold for list — and knew you had to rush down to buy the Trans Am the second it rolled off the transport truck.
But those cars weren’t so hot up North. At the time a local new car broker was buying brand new Trans Ams by the truckload in New England, paying just $500 over invoice plus the freight cost to ship those vehicles to Dallas. We added $500 per car as the broker’s fee and retailed those hard-to-find Pontiacs from here.
Head Beats Heart
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Within a few years the memory of Smokey and the Bandit had faded, while the Iranian Revolution was the lead story on the evening news. Yet you didn’t have to watch those broadcasts to know what was going on; the turmoil in the Middle East showed in the price of gasoline every time you filled up your car. So the turbo Trans Am fell out of favor, even in the South. Instead, people purchased new Honda Accords, Preludes and Civics, knowing it would be months before their vehicle would be delivered.
Unlike the buyer frenzy for the Pontiac, driven by a movie image, the stampede to Honda was brought on solely by the suddenly high price of gasoline. Only in 1979 and 1980, every week the Automotive News’ classifieds carried ad after ad from Honda dealers offering to buy any and all Accords, Preludes or Civics from other Honda dealers. And they were willing to pay list price to get them.
As the 80s wore on, few cars came to market that had that kind of emotional impact on potential buyers. The Trans Am phenomenon was succeeded for a short while by the Pontiac Fiero, while the second generation of the Honda Prelude saw a few dealers charging up to $5,000 over list — and that car too stayed that hot for years.
“Fair” is Fair?
When the first Acura Integra GT came to market, it performed every bit as well as its cousin, the Honda Prelude, had years earlier. But maybe best remembered from the late 80s was Mazda’s sporty Miata convertible in 1989; again, the size of the buying audience dramatically overmatched Mazda’s ability to produce that fun little roadster convertible. Consequently, many dealers again had surcharges on the Miata’s list price in excess of 25 percent of the MSRP.
Now, to be fair, many dealers never charged over list for their products, even when customers walked in saying that they had no problem paying more if it helped them get their desired vehicle faster. Frank Kent, Classic Chevrolet and Randy Hiley were but a few of the dealers who just would not charge over MSRP on their products, no matter how hot they might be at retail or how fervent customer demand.
Dealers like Bill McDavid, on the other hand, had no problem charging over list; and he had the most logical and rational explanation when someone confronted him about it. Bill would just smile and slowly say, “99.999 percent of the customers that come into my store don’t think the window sticker means anything when they want a discount; so why should anyone be upset when we don’t pay attention to the list price, either?”
The Pot Quits Boiling
But things started settling down a generation ago, when the Acura NSX made its appearance. Some dealers presold theirs for as much as $25,000 over list. But, by the end of the first model year, everyone willing to pay such a surcharge already owned an NSX, and so discounting became the norm.
It might even be fair to say that the Acura NSX changed how dealers viewed ultra-hot products. Because during the Nineties, a decade whose exceptional car market would ramp us up to 2000 and the best year ever for new car sales in America, the NSX was slowly dying at retail every year. And that should not have been the case: High-end sports cars were doing just fine in that nine-year period. Yet at one point Acura had to put a $10,000 Conquest rebate — You had to produce proof you had owned a high-end sports car from another manufacturer — on their NSX just to move the metal. Maybe it was the blowback from the first sales far above list price.
True, the 2005 Ford GT also brought tens of thousands over list price at many dealerships. But, because of its extremely low volume, the supply of GTs ran out before discounting would have been demanded.
Still, most of the market was changing during the late 90s. When the 1998 Honda Odyssey came out and completely reset the minivan market, it was virtually impossible to get a discount on the model with leather. The same was true for the second generation of the Acura TL, at least the model with leather and a navigation system. Both vehicles stayed sold out for at least two years at list price.
Maybe the perfect example of how things have changed is when the Toyota Prius sold for $4,000 over list when gas prices spiked to $4 a gallon, then suddenly its used car market pricing dropped by $7,500 within months once gas prices fell back. Today we would have to look at the Dodge Challenger Hellcat to find a vehicle that will be in such short supply that the list price is the sales price. And even here, the new Hellcat has less than half of the markup the Acura NSX had 24 years ago, even though their list prices aren’t that far apart.
And yes, when new Corvettes come out they too often sell for list price. Just not for very long.
An Uber Driver, Maybe?
Therein lies a fundamental truth of how the industry has changed over the previous 40 years. First, it was always the rarest vehicles that created such insane customer response that price was no object at all to the end user. True, when many extremely popular cars were completely redesigned, those vehicles might have fetched higher prices for the first six months; and a few in that category still do today. But for the mainstream dealers selling high-volume but popular cars, that period from hard-core excitement to hard-core negotiation has dwindled over time from years at list price to six months to six weeks — to the end of the first week of shipments.
In a way it’s a shame. It was those high-profile, high-demand and exciting cars that drove the auto industry’s growth, both for salespeople and for those lucky enough to get the vehicles that were so hard to find. What most buyers don’t realize is the fact those are the very same cars that brought so much in resale value. The industry’s truism, “If it’s hot new, it’s twice as hot used,” is still true.
Then again, and although it’s only 18 years later, who would ever pay list for a minivan anymore?
© Ed Wallace 2015
Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism. He hosts Wheels, 8:00 to 1:00 Saturdays on 570 KLIF AM. E-mail: firstname.lastname@example.org; read all of Ed’s work at www.insideautomotive.com.