Sticker prices on autos becoming more irrelevant
By Ed Garsten
Detroit News
SOUTHGATE, Mich. — Ted and Barbara Zmuda recently spent a rainy Friday pressing their noses to the windows of new sport utility vehicles and wagons at Dick Genthe Chevrolet in Southgate, Mich., but the couple paid little attention to the price plastered on those windows.
Steve Perez • Gannett News Service
"The sticker price is a little deceiving," said Ted Zmuda, of Rockwood, Mich.
The manufacturer's suggested retail price, or MSRP, at top, is considerably more than the available price for a 2005 Chevrolet Impala being sold in a showroom last month in Dearborn, Mich.
Escalating and ever-more-complex incentive programs used by automakers have rendered the traditional manufacturer's suggested retail price, or MSRP, nearly useless for many consumers.
During General Motors Corp.'s recent Red Tag sale, dealers posted a tag on the vehicles that listed the MSRP side-by-side with the price that includes all discounts. The difference was usually several thousand dollars.
With such disparities, there's a growing debate over whether auto companies should scrap MSRPs and post prices on vehicles that are closer to real-world prices.
"For many manufacturers, constant incentives make the sticker price a meaningless number," said Jane Liu, vice president of data analysis for auto research Web site Edmunds.com.
An analysis by Edmunds.com found that in September the average vehicle sold at a record $5,200 under sticker price, breaking the $5,000 barrier for the first time. Incentive levels have since declined, but there is still a wide gap between final transaction price and sticker price.
"At what point does the manufacturer have the right to undermine the law that is meant to protect consumers?" asked analyst Jim Sanfilippo of Automotive Marketing Consultants Inc. in Warren, Mich.
Auto research Web site Edmunds.com says that the constant incentives offered by many carmakers make the sticker price a meaningless number. An analysis by Edmunds.com found that in September the average vehicle sold at a record $5,200 under sticker price, breaking the $5,000 barrier for the first time.
Sanfilippo said a law limiting the percentage of discount from the sticker price might be the answer.
$5,200 saving reflects trend
Such a limit is a bad idea because automakers need the flexibility to adjust incentives to manage inventory levels and respond to the competition, said Paul Ballew, General Motors Corp.'s executive director for global market and industry analysis.
Ballew said MSRP is one relevant figure, but buyers can find out the invoice price of a vehicle on the Internet and elsewhere to make an informed purchase.
"We've had to keep up with a real competitive industry with more 'real-time pricing,' which of course is incentives," Ballew said.
Steve Rayman, who heads the new-car dealer's association in Atlanta, has taken customer expectations of deep discounting into his own hands.
"Price sells cars and I just get downright nasty with the price," Rayman said. "Little Jeep Liberties might be 15 grand, but I might price them at $9,900."
Jesse Toprak, director of pricing and market analysis for Edmunds.com, believes that automakers should lower sticker prices instead of confusing consumers with constantly changing discounts.
"It seems they are creating unrealistically high MSRPs," Toprak said. "The higher the MSRP, the higher the discount will be — and with higher discounts, residual values are hurt."
Low sticker price placed 11th on the list of attributes customers said they looked for when considering a new-vehicle purchase, but almost 75 percent said it is extremely or somewhat important, according to CNW research.
"People still relate to it in a peculiar way," said Art Spinella, who heads CNW Marketing and Research in Bandon, Ore. "It's not something they trust or like. It's just a point of reference."
