Absolutely but I don't see why the manufacturers should care if they are finding buyers at a certain price point other than they need to move inventory at some level to maintain the pipeline.

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If you’re truly in favor of a free market, it works across the board… right?

Absolutely that is why I am okay with them selling for below MSRP or above MSRP. MSRP should be the guidance of the baseline FMV under a given set of conditions.

The dealers can't break their contract with the manufacturers but why would the manufacturers dictate the price they have to sell at.

The whole point in this thread was talking about insane prices. The kick starter to our discussion was this comment:

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Well, if that is the true FMV, why wouldn’t the automobile producers establish that as their (revised) MSRP, and why are some auto producers now coming down on dealers

FMV is what the market decides based on supply and demand. If dealers are trying to sell above FMV then there would be excess inventory at dealerships (which isn't the case). If they are selling below FMV there would be shortages of inventory (which there are). Of course there are other factors that impact the overall dynamics but that just changes the FMV.

The part about manufacturers coming down on the dealers is regardless of FMV. That should only really be an issue if there is legal grounds to stand on which means violation of the contract. That very well could be happening but that does not change the market FMV.

The prices aren't insane if someone is willing to pay it. It is so short sighted to think that selling for $5k above MSRP is insane but selling $10k below is fine. That is only the case because of the historical scenario where the supply/demand balance have generally put the consumers in a position of power. Currently the dynamics have flipped and we all take advantage when the leverage swings into our favor.

I know you are big into options. I am sure there are times when the premiums outweigh the risk and you collect profits. I assume you don't shy away from making extra money because your are "price-gouging" the person on the other side of the trade.

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Posted by Jag_Warrior

Virginia

Member since May 2015

4292 posts

Posted on 6/16/22 at 5:34 pm to bod312

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Absolutely but I don't see why the manufacturers should care if they are finding buyers at a certain price point other than they need to move inventory at some level to maintain the pipeline.

I can only assume that the manufacturers/franchisors have determined that extreme markups over their established MSRPs gives them and their brands a “bad look”. The precise reason(s) would have to come from the manufacturer representatives.

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I am okay with them selling for below MSRP or above MSRP.

And it’s fine that you’re OK with it. I have no issue with that. But since the franchisors have an issue with it, that’s all that matters. No one is forcing Chevrolet dealers to remain Chevrolet dealers, or Ford dealers to remain Ford dealers. And by the same free market token, we can agree that the franchisors cannot be forced to deliver higher demand or preferred models to what they consider to be rogue dealers going forward.

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The prices aren't insane if someone is willing to pay it.

Perceived opportunism and brand damage is likely what concerns the manufacturers. Robby Gordon was a driver in the CART series when my company was sponsoring a team. A few bad words from Robby about his Ford-Cosworth engine on national TV, and the next thing you know, Ford black-listed him. So the same is likely happening with dealers who are looking to pad their own pockets, while contributing to at least the perception that they’re price gouging. Selling Big Macs for $40 a burger might have been “FMV” back during Katrina. But it’s also likely that McD’s would have pulled down your sign once the dust cleared. You could still have a restaurant and sell homemade burgers though - just without the golden arches above the store.

It’s fine for us to discuss it here, but the franchisors are calling the plays in the end.

quote:
I know you are big into options. I am sure there are times when the premiums outweigh the risk and you collect profits. I assume you don't shy away from making extra money because your are "price-gouging" the person on the other side of the trade.

Options don’t really work that way. Part of the pricing mechanism is based on implied volatility. When looking at an options table, among the things you’ll notice are the deltas and the probability of being in the money or out of the money on a particular trading day. So during times of higher volatility (like now), one would get higher premiums if going short options. But it’s not necessarily a case of the rewards outweighing the risks. The risks are actually elevated should there be an upward spike in IV, and that’s why brokers are now requiring higher margin requirements on certain naked options trades. Just today, I watched what were 5% probability in the money short put options yesterday go to 40% probability in the money today. One doesn’t know how profitable a trade will be until it’s bought or sold to close.

But to your point, there are times that options market makers will dramatically increase the spreads or even insert fake bid/ask figures. And some (many) traders do see that as price gouging. Part of what some of us do is hit their fake prices to expose them. I’m not into reporting people/companies to the exchanges… but it has been known to happen.