So why don't car manufacturers drop their prices?

[Oreomitch]

Please educate me...If manufactures are large stock of cars in their yards, why not drop their prices, take the knock...it's not like the purchasers will sell off their cars in the next 5 years AND they have to get them serviced (extra channel of income), right?!?

 

[AntiThesis]

Because they know it'll swing around one day

 

[Angstrom]

I've thought about this quite a lot lately. I've recently bought 2 new cars and traded in 2 older ones and I was curious as to this.

My suspicion is that the primary reason for this is that any price reductions on new models now will have an adverse affect on used car prices 3 to 5 years down the line. It seems to me that it is in the best interests of car dealerships to maintain the value of a used car so that in the future current customers will be able to be return customers because the trade-in value of their used vehicles will be sufficiently high that they will be able to afford a new vehicle.

Make sense? Maybe not .... use it, don't use it

 

[AntiThesis]

Could be. Although aren't Used Car prices going up because hardly anyone is buying them?

 

[Angstrom]

Could be. Although aren't Used Car prices going up because hardly anyone is buying them?

Perhaps. I don't pretend to understand it completely. Even my Economics PhD brother-in-law can't explain it satisfactorily. It is an interesting issue that I couldn't quite fathom though.

 

[AntiThesis]

Yeah I've no proper idea either... perhaps we'll see prices come down in the coming months but I doubt it. I heard a guy from VW say they think it'll start moving upward again in the next month or so.

 

[Fazda]

There is NO Logical explanation when it comes to SA Car manufacturers and inflated prices. Normal Economic values cannot be used in trying to understand them, because they defy everything you may have learnt in Economics 101.

As a rule of thumb in SA, if you cannot move stock, push up the price and sit tight, because the consumer will finally crumble and buy.........they have always done it in the past, and they will continue to do it in the future.

Just reading through this forum's threads and looking at what the average poster considers a reasonable price to pay for any given car, highlights the fact that SA Car buyers must be amongst the most gullible in the world, and the Manufacturers know it.

Why sell a car for 20k lower than retail now, when you can sit "vas" for a few more months and get your original inflated price?

 

[Angstrom]

There is NO Logical explanation

Personally, I disagree. There is almost always a logical explanation for why any business makes a decision. Whether or not that reason is correct is open to interpretation.

Why sell a car for 20k lower than retail now, when you can sit "vas" for a few more months and get your original inflated price?

With my limited knowledge of economics, businesses operate based on cash-flow. Very few businesses, in my estimation, are able to "sit vas" and weather the storm.

Again, my personal opinion. I am not an expert

 

[Fazda]

Personally, I disagree. There is almost always a logical explanation for why any business makes a decision. Whether or not that reason is correct is open to interpretation.

With my limited knowledge of economics, businesses operate based on cash-flow. Very few businesses, in my estimation, are able to "sit vas" and weather the storm.

Again, my personal opinion. I am not an expert

Historically, SA Motor manufacturers have never given a damn about the consumer. I have worked for VW, Toyota and GM in the past 20 years, and each one is as bad as the other, with most of them tagging on an extra 6 or 7% to their prices every quarter, without ever worrying about whether their cars would be come too expensive for the man in the street.

The majority of their sales of new cars go to people who have some sort of car scheme...add to that the fact that SA buyers are possibly the most snobbish in the world, in that they have to either keep up with the Joneses, or outdo the Joneses, and to hell with the price, the manufacturers have attached themselves to the consumer milch cow for years, knowing that they will get rid of their stock, no matter what the price.

The price of SA cars when compared with the price of houses gives us one of the most expensive fleets of cars in the world, and the Manufacturers don't have to worry, because they know that the average idiot out there will just keep on buying, no matter what the price!

 

[adamr]

Historically, SA Motor manufacturers have never given a damn about the consumer. I have worked for VW, Toyota and GM in the past 20 years, and each one is as bad as the other, with most of them tagging on an extra 6 or 7% to their prices every quarter, without ever worrying about whether their cars would be come too expensive for the man in the street.

The majority of their sales of new cars go to people who have some sort of car scheme...add to that the fact that SA buyers are possibly the most snobbish in the world, in that they have to either keep up with the Joneses, or outdo the Joneses, and to hell with the price, the manufacturers have attached themselves to the consumer milch cow for years, knowing that they will get rid of their stock, no matter what the price.

The price of SA cars when compared with the price of houses gives us one of the most expensive fleets of cars in the world, and the Manufacturers don't have to worry, because they know that the average idiot out there will just keep on buying, no matter what the price!

+1

and they get creative with finance schemes to make it appear as "more affordable" ... know so many people that just worry what their monthly payments will be and not worry about any residuals etc

 

[Angstrom]

Thank you, Fazda.

I guess you do learn something new everyday.

 

[Oreomitch]

One reason for not budging is that a lowering of the price could cheapen the brand! However, maintaining prices to be comparable with the competition does raise questions about price fixing

Perhaps lowering the price of new cars will make it difficult to raise them again? However, not making sales targets puts people jobs on the line...it's a vicious circle.

 

[UtterNutter]

To answer the original question: greed.

 

[JK8]

One reason for not budging is that a lowering of the price could cheapen the brand! However, maintaining prices to be comparable with the competition does raise questions about price fixing

Perhaps lowering the price of new cars will make it difficult to raise them again? However, not making sales targets puts people jobs on the line...it's a vicious circle.

I also agree with this.
Manufacturers have worked hard to keep their vehicles up and resale values up.
They cant afford to lose it because of one recession. Ofcourse with the recession it brings the smaller players in the market into the game by offering better deals and value for money like Hyundai and other Korean manufacturers for example.

In a few years the recession will be over and those manufacturers will benefit from product loyalty if their cars are good.

As for SA, we lucky in that we dont pay alot of tax on cars like other countries. Europe for example pay quite a bit for tax and insurance so their cars are a little cheaper, but in the end we end up paying less for running costs and insurance and tax. That might change in the future.

 

[asshat99]

I don't think the dealerships really care about the resale value. At all. Try and see how much a brand like renault (or anyone really) will pay to buy your car back from you. They will usually offer way below what the car would be worth elsewhere (unless they are using it to make buying a new car more attractive). Some dealerships won't even buy secondhands unless you are buying a new one. If they wanted to guarantee the second hand value, they would want to spend more on buying back second hand cars.

A major risk in lowering the prics is that you will piss off the people who have just bought at the old price. But you can still hide this effect but selling at lower than advertised/official prices or giving better tradein or throwing in extras.