MANY THINGS ARE UNIQUE TO THE RETAIL automobile business. But nothing is more unique than the retail price sticker on pre-delivered new vehicles.
Why is this important U.S. industry required by law to display their retail prices on their products?
When the new vehicle labeling law was enacted on July 7, 1958, Congress's intent was explained in the House Report accompanying the legislation:
"The primary purpose of the bill is to disclose the manufacturers' suggested retail price of the new automobile so that the buyer will know what it is...
"Recently, new-car dealers have been plagued by unfair and unscrupulous marketing practices on the part of some dealers... These practices are called 'price packing' and misleading advertising...
"Price packing is the practice of marking up or adding charges over and above the normally recognized markup from the price at which a dealer purchases a new automobile or truck from the manufacturer...
Much of the trouble caused by the pack has been the misconception, created in the minds of the public as to the value of the used car in the current market plus the uncertainty of knowing what their car is worth."
The price label on new vehicles has not performed up to the standards set by the Congress in 1958 for consumers as well as dealers.
Dealers in several parts of the country use add-on price labels on new cars in order to inflate the trade-in price on the consumer's vehicle. One dealer says he tried to compete on trade-in figures by not using the add-on sticker. Competitors clobbered him.
I was selling Buicks in the 1950s and we were losing a ton of business to Mercury simply because they were offering huge trade-ins on what turned out to be Fords with inflated list prices.
True, the market was full of price packing and cried out for change. However, allowing manufacturers to price retail products was allowing the fox into the hen house.
The price sticker is to allow the new-car shopper to effectively compare vehicles between manufacturers.
Compulsory pricing of vehicles at the factory through the Monroney sticker borders on price-fixing.
It also gives manufacturers tremendous abusive powers over their dealers and consumers. The erosion of the new vehicle dealer mark-up from its original 24% to its current 11% in some cases is an example of the power of the Monroney in the hands of manufacturers.
During my new-car dealer career there were several instances when my manufacturer announced sticker price reductions accompanied by the removal of standard equipment from the vehicle.
Either that or reducing the dealer discount and deceiving prospective buyers that there was no price increase at new car announcement time by manipulating the Monroney sticker.
Recently Mercedes-Benz USA announced an intended discretionary 50% cut in their dealer mark-up (from 13% to 7%) for S-series models and perhaps other models in the future.
It's a way for a manufacturer to hold the line on prices or even reduce them.
Detroit has been playing this "shell game" with sticker prices for years. Is it any wonder dealers are forced into devious marketing devices such as add-on stickers and after sell marketing?
It is probably impossible to expect any radical changes in the structure of the Monroney sticker. The hue and cry by misguided consumer protection advocates would be too much of an objection to overcome, even though the current system is loaded in favor of the manufacturers.
There is an answer which would best serve the dealers' interest, and provide the consumer with legitimate information to compare competitive manufacturers' products when shopping for a new vehicle.
Renting a car on a recent trip to Europe, I experienced a system for separating car models which allowed comparison with competitive models without requiring the rental company to publish actual prices.
This system uses categories (A through D] to establish the luxury and size differences between cars from each purveyor.
For example sub-compacts, after satisfying weight, size, and other price class requirements would be designated A. Larger more luxurious compacts, after satisfying weight, size, and other price class requirements would be offered as a B class. More luxurious cars would be offered as C and D classes and priced accordingly by each individual rental company.
The criteria for using this system to describe particular models offered for sale in the U.S. could be established by consensus among trade associations or government agencies.
Marketing new vehicles using this system would put the pricing of new vehicles in the hands of dealer entrepreneurs, where it belongs and remove it from the machinations of manufacturers.
Nat Shulman was owner of Best Chevrolet in Hingham, MA for many years.
