That seems to be the question on everyone's mind these days. With Chrysler filing for bankruptcy a few weeks ago, and with last week's announcement of 789 dealership closures, it seems anyone can walk into a Chrysler, Dodge or Jeep showroom and get a new car for 50% off the MSRP.
Or maybe not...
Like most things in life, the Chrysler situation is not as simple as it seems at first glance. On the one hand, you've got 789 dealers going away, which means something like 44,000 vehicles need a new home by June 9th (the last day Chrysler will support those dealers with sales incentives, warranty coverage, flooring costs, etc.). Chrysler has made one thing abundantly clear: It won't be taking these cars back.
So it seems likely those dealers would go to great lengths to move the iron. However, they don't have to sell those vehicles to end users. They can sell them to other Chrysler dealers, or they can send them to auction. While certainly not the most profitable way to clear out a dying dealership, it's better than taking 50% offers from the punk kid hoping to legally steal a new Challenger R/T.
Let's look at the numbers. If a new R/T is priced at $30,000, and the invoice (dealer cost) is $28,000, then selling it to the mullet-wearing punk with a skull-and-crossbones black T-shirt for $15,000 is a $13,000 loss. Even a dying dealership knows that isn't smart business. If a dealer across town, or at a dealer auction, offers anything over that $15,000 (which is likely) the dying dealer will tell skull-and-crossbones to get back in his yellow, driving-on-a-run-flat '95 Plymouth Neon and get the hell off his car lot.
Does this mean there aren't great finds to be found at Chrysler, Dodge or Jeep dealers in the coming weeks? Not necessarily. Most surviving Chrysler dealers are already swimming in excess vehicle stock. Do they really want more vehicles to sell? Probably not. Same goes for an auction. Dealers shopping here know the new-car market remains soft, and their bids will reflect this.
By now you may be thinking, "So, Karl, can I buy a new Challenger R/T for $15,000 or not?!"
The answer is...maybe. But to do it you'd have to find a dealer who simply can't unload said Challenger for better money by any other means. I don't think that's going to happen...but 44,000 cars is a lot of cars. Of course they aren't all Challenger R/Ts.
However, if you're looking to scoop up a shiny new Dodge Caliber at 50% off MSRP you're chances are much higher. Not that I'm suggesting such a move. Fifty percent off a Caliber is still about 20% too much in my opinion.
But if anyone out there does find a new Challenger R/T at $15,000, let me know. I might even wear a mullet while taking delivery.
By flicmod
on May 19, 2009
06:26 AM
Chrysler won't be supported in forcing the 789 dealers to eat their supply. That goes beyond the means of bankruptcy. By doing this, they're not merely getting out of franchise contracts, they're forcing corporates' own problems of too much supply onto them. They're effectively telling the dealers they need to help Chrysler out... and then repaying those dealers with the loss of their franchises.
I'll be very surprised if the courts uphold this demand by Chrysler. As 'brn' said over on a Straight Line blog, Chrysler is most likely just fronting with this scheme to see how much product they can move before they have to buy back the remainder. I would agree with that.
By 08_miata
on May 19, 2009
07:03 AM
Unfortunately Chrysler doesn't have a whole lot of choice. Either they try forcing these 789 dealers to close, or come a year from now, ALL Chrysler dealerships will close when the company goes belly up.
One good thing that might come from this. Maybe this will begin the process that finally kills all of the franchise / dealership protection laws that have been strangling car manufacturer's for years.
By flicmod
on May 19, 2009
07:07 AM
"One good thing that might come from this. Maybe this will begin the process that finally kills all of the franchise / dealership protection laws that have been strangling car manufacturer's for years."
Amen to that.
By vvk
on May 19, 2009
07:11 AM
I would not take a Chrysler product if they paid me...
But this is still good news of consumers. This should pull down pricing on all brands. At least in the short term. And long term... hello, hyperinflation!
By blueguydotcom
on May 19, 2009
07:23 AM
also destroys used car values. In essence if your car is holding up well mechanically, keep it. You're gonna lose your shirt if you try to sell a used car right now. And trade-ins...well that's just hilarious that people even consider trading in a late model car.
By euroman71
on May 19, 2009
07:49 AM
Chrysler dealers are willing to sell cars and trucks at huge discounts just to move the product. I don't think customers need to worry about purchasing Chrysler (or GM) cars. Warranty will still be honored (just like Oldsmobile when it phased out). The uncertainty is the real issue. If Chrysler goes into liquidation, that will certainly degrade used car values.
By pushrod
on May 19, 2009
08:15 AM
flicmod: the judge overseeing the bankruptcy has already approved this course of action, Chrysler didn't do this unilaterally (they need permission from the judge to do pretty much everything except to use the mens room). There is always the possibility of appeal, but the reality is that the rules for many things change once a company is in bankruptcy protection. Unless the judge's direction is overturned on appeal this course of action will stand. The only way I see this being reversed is if the bankruptcy judge made an error in law, and that doesn't appear to be the case here. Just because something seems 'wrong' doesn't make it illegal, sadly.
Besides, Chrysler is making an effort to work with the discontinued dealers and existing dealers to move the inventory. It may only be a token effort, and they may not be helpful in reality, but Chrysler isn't walking away completely.
By tonupboi
on May 19, 2009
09:28 AM
You're forgetting the most obvious reason why someone isn't ever going to buy a new Challenger R/T for $15,000.00.
Even if a dealer is desperate enough to accept that kind of offer someone else will happily come along and offer $15,500.00 And which offer do you think the dealer will take? And then there's the guy willing to pay $16,000.00, er, $16,500.00, uh, you get the picture. A floor price will establish itself. But it's going to be at a level well above the willingness of the real bottom-feeding crowd to spend.
Yeah, there's going to be some bargains out there. But the level of bargain is going to be awfully relative, depending on the desirability of the product.
By flicmod
on May 19, 2009
11:06 AM
To build on what tonupboi is saying, I think this is going to be an experiment in capitalism. Customers are obviously NOT wanting to pay full price for Chrysler vehicles. If the dealers decide to drop prices to 50%, or even 30% or 40%, of the MSRP, people will respond with what they think the car is worth.
In a price war between consumers, the fair market price will be shown because people are voting with their dollars. We'll then see what people really think the value of a Chrysler really is.
By jstandefer
on May 19, 2009
11:30 AM
There are two Chrysler dealerships that are being shut down here in San Diego County: John Hine Dodge and North County Jeep. The Jeep dealership hasn't changed a thing on their website, but the Dodge dealership has already posted a list of their Dodge inventory with discounted prices, after rebates. Since I may be interested in seeing what they'll be willing to do, I entered everything into a spreadsheet.
Percentage-wise, their discounts range from 21% (Durange Hybrid) to 32% (Charger SXT). From a dollar-wise comparison, their discounts range from $4,720 (Caliber SXT) to $14,242 (Ram 2500 Laramie Mega Cab 4x4). I can definitely see a trend in percentage discount by model, and using that to judge what they consider popular, the list generally breaks down to (most popular first):
1. Durango Hybrid
2. Grand Caravan
3. Ram 1500
4. Charger RT
5. Caliber
6. Durango
7. Nitro
8. Charger (non-RT)
9. Journey
10. Ram 2500
Certainly, I would imagine the discounts start going up as the clock winds down. They have 22 days to move 72 units.
By bbechtel16
on May 19, 2009
07:36 PM
I was under the impression that dealers don't actually own a large portion of their inventory? I might have got that from "Confessions of a car salesman"?
By yankeez
on May 20, 2009
05:54 AM
Already have my 09 Challenger R/T. If I were to get another Dodge, I'd hope to find a fire-sale Charger SRT8. I know some don't like the Charger because it's a 4-door (get over it already...), but I've always loved the SRTs.
And besides, my Challenger could use a big brother.
By flicmod
on May 20, 2009
05:57 AM
bbechtel16,
I believe the dealers are actually in agreement with the manufacturer on a certain interest rate at which they buy the vehicles. So the longer a car sits on the lot, the more the dealer owes the manufacturer. In effect, the manufacturer still owns the product and is getting added income from the dealer from the interest rate, similarly to how a consumer would buy a car with a loan.
Is this what you're thinking of?
By jlaszlo
on May 20, 2009
10:48 AM
Besides the dealer in San Diego, has anybody been able to find a dealer that's closing with desirable cars in stock (Challenger RT, 300C, Charger RT)? I've checked about 5 dealers and have only come across a Charger RT. They quoted invoice - rebates.
3 dealers were already sold-out.
By jstandefer
on May 20, 2009
02:37 PM
jlaszlo: There is another dealer in San Diego (Rancho Chrysler) that's not closing down, but they do have six new 2008 300Cs left. They never list any discount prices, but I know they did sell a new $30.5k 2008 300 Touring for $19,999 a few weeks ago.